Federal Roundup: DOL Proposes Fiduciary Rule Delay While Congress Tackles Big Policy Issues
Congress returned after Labor Day from its traditional long August recess to tackle an aggressive agenda. On the top of the list are funding the federal government, which is set to shut down at the end of September, raising the debt ceiling, ACA reform, passing a budget, tax reform and, as if these issues were not enough, scrambling to address two historic devastating hurricanes. To the surprise of many D.C. observers, the President reached across the aisle to craft a relief package for Hurricane Irma that included raising the debt ceiling and a short-term patch for keeping the government running through this December. While there is controversy surrounding this deal, the path has been somewhat cleared for a few months for Congress to move onto passing a budget and working on healthcare reform and tax reform. However, the damage of Hurricanes Harvey and Irma is still being assessed, and another relief bill will follow soon.
On the tax reform front, there have been many outlines, principles and rumors floated, but no substantive plan has been released. House and Senate leaders have been actively working with the Administration, and therefore we anticipate that the details of a comprehensive reform plan should emerge in the near future. Among our concerns has been a steady buzz about so-called “Rothfication,” which would be a policy move to shift retirement accounts to Roth accounts. While there is no data to show the impact on savings behavior, we know that Roth accounts are not widely used by consumers, and there is a potential for negative consequences. NAFA is carefully monitoring for any language that could have adverse impacts on retirement savers and the annuity marketplace.
On a positive note, a temporary sense of calmness has emerged stemming from the DOL recently proposing a delay of the effective date of the full rule until July 2019. A two week public comment period closed September 15th , and NAFA submitted a comment letter lauding the DOL for considering this change and urged that it be adopted as soon as possible. This comment letter follows two comment letters that NAFA recently filed in response to DOL requests for information about delaying the January 1, 2018 effective date and on making changes to the rule. In our first comment letter, we urged a delay of the effective date of the rule for one year as there is too much confusion in the marketplace about compliance and there is pending litigation. In our second comment letter, we urged that fixed indexed annuities be placed back into PTE 84-24, and we presented new information about the harmful effects of the rule on carriers and IMO’s.
Presumably the DOL will act by the end of October to finalize a delay period, as January 1, 2018 is right around the corner, and there is still much concern and confusion in the marketplace about this rule. Under the proposed 18-month delay advisers and insurance agents will still have to operate under the Impartial Conduct Standards that went in effect on June 9th, but the onerous BICE contract would be delayed and FIAs would be covered under PTE 84-34, which provides some relief. Certainly, during what we expect to be an 18-month delay, we hope the DOL will conduct further analysis on the impacts of the rule on retirement savers and fixed annuities. It is imperative that the DOL make changes to the rule during this delay period. Most importantly we cannot have the fixed annuity marketplace split into two compliance regimes for qualified money; with FIA’s being cover by the unworkable BICE and traditional fixed annuities operating under PTE 84-24.
There are also several active legal cases against the DOL fiduciary rule, including NAFA’s, which could once again alter the fate of this rule that has overshadowed the retirement marketplace since 2011.
Rest assured that NAFA will keep pushing forward to defend the fixed annuities and the customers it serves!