The National Council of Insurance Legislators wants to keep the U.S. Department of Labor from bringing back the 2016 fiduciary rule for sales of annuities and other retirement savings products.
NCOIL last week adopted a resolution opposing the revival of the DOL fiduciary rule effort at an in-person meeting in Minneapolis.
According to the resolution, a return to the fiduciary rule approach "would threaten the proven state-based legislative and regulatory structure by imposing a vague and burdensome fiduciary standard on non-fiduciary sales relationships, thereby upending the retirement savings marketplace."
South Carolina state Rep. Carl Anderson, a Democrat who has worked as an insurance agent, sponsored the measure. He called NCOIL's adoption of it "yet another example of NCOIL pushing back on unnecessary federal encroachment in the state-based system of insurance regulation."
What It Means
Debate over any new Labor Department fiduciary rule proposal could be fierce.
A new DOL fiduciary rule could affect how you get paid, what kinds of disclosures clients get, what kinds of exposure to litigation you face, and what kinds of financial services products and retirement savings support tools and services are available to ordinary retail consumers.
The DOL Fiduciary Rule
The U.S. Securities and Exchange Commission already regulates sales of variable life insurance and variable annuities, as a result of rules classifying those products as securities.
The modern Labor Department fiduciary rule fight over sales of fixed annuities has its roots in a financial services regulatory principles commentary that officials in the administration of former President Barack Obama released in 2009.
The department completed fiduciary rule regulations in 2016.
The Labor Department fiduciary rule would have required sellers of non-variable indexed annuities and other products classified as fixed annuities to put the interests of consumers first. In practice, that might have upended traditional U.S. life and annuity sales strategies by requiring retail agents and brokers to offer all fixed annuities — or products from a wide range of issuers — and limiting or eliminating the use of commission-based sales compensation.
The 5th U.S. Circuit Court of Appeals blocked the rule in 2018.
The SEC then developed Regulation Best Interest, which requires annuity sellers to work in the best interest of the consumer, and the National Association of Insurance Commissioners developed model regulations meant to complement Reg Bi. Thirty-nine states have now adopted the Reg BI model, according to an implementation map posted by the NAIC's Annuity Suitability Working Group.
The Labor Department recently suggested in a regulatory agenda that a new DOL fiduciary rule will be coming out in August.
Over the years, many insurers and groups representing insurance agents have tended to oppose the DOL fiduciary rule approach.
