IRI Closely Watching For Fiduciary Developments

The Insured Retirement Institute believes less is more -- at least when it comes to regulation of financial products into retirement accounts.

Like everyone else in the industry, Jason Berkowitz, chief legal and regulatory affairs officer for IRI, awaits the new definition of "fiduciary" the Department of Labor added to its regulatory calendar last year. The new rule is expected any day now, but isn't likely to make the industry happy.

"Our view is that rulemaking is not needed," said Berkowitz. "Our view is that we have the five-part test that's been in place for 45 years, and we know how it works. We know how it applies. We have other transaction exemptions that we think are functioning the way they're intended. We have Reg BI and the NAIC model. We think this is a framework that should be given some time to function in the marketplace."

Berkowitz will speak on IRI's regulatory priorities Thursday during the Retirement Industry Conference, hosted by Secure Retirement Institute and the Society of Actuaries.

The State Of Rules

The Department of Labor allowed the Trump administration's investment advice rule to take effect in February.

The new rule has two main parts: a new prohibited transaction exemption allowing advisors to provide conflicted advice for commissions; and a reinstatement of the "five-part test" from 1975 to determine what constitutes investment advice.

Industry lobbyists are generally unsatisfied with the rule, and Berkowitz explained why. For starters, the exemption "is not particularly workable in the context of independent producers, because it requires a fiduciary financial institution," he said.

"For independent producers, there's typically not a financial institution that is eligible and willing to serve in that function. Insurance companies are not generally going to be comfortable supervising producers who can recommend products offered by other companies, and these independent producers are typically not affiliated with broker dealers, or banks."

If the industry didn't like the Trump rulemaking they surely won't like what the Biden Department of Labor is crafting. The agency signaled through its agenda that it intends to publish a new definition of "fiduciary."

IRI is "ready and waiting to engage," Berkowitz said, while keeping in mind the federal appeals court decision that overturned a 2016 fiduciary standard put forth by President Obama's DOL.

"We want to make sure that as the definition of fiduciary may continue to evolve, that it does so in a manner that is consistent and compatible with the Fifth Circuit ruling in case that overturned the 2016 rule," Berkowitz said.

States In Play

At the state level, IRI is laser-focused on getting the National Association of Insurance Commissioners' annuity rules model update approved in as many states as possible, Berkowitz said.

Wisconsin recently became the 23rd state to adopt the NAIC model, which articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation. With the outbreak of COVID-19, states were slow to adopt the model in the months that followed. Activity began to pick up in late 2021 and has continued in 2022.

"I continue to believe that we will likely see the vast majority of states have that in place by the end of next year, if not sooner," Berkowitz said. "There's always a couple of stragglers when it comes to NAIC models, but we're working very diligently with a number of industry groups that are singularly minded to work with the states that haven't picked it up already."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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