Annuity regulation, threats, and the opportunities within

By Paul Feldman

Wayne Chopus, president & CEO, Insured Retirement Institute, discusses the state of the industry and regulatory issues, in particular, the threats posed by the Department of Labor fiduciary rule effort, during the recent NAFA Annuity Leadership Forum.

Interview Transcript

Paul Feldman:

Hello everyone, Paul Feldman. I'm here today in DC with Wayne Chopus of the IRI. And Wayne, tell us a little bit about the IRI for those who are not familiar.

Wayne Chopus:

Sure. So we are the Insured Retirement Institute, a DC-based trade association that supports the retirement income industry. We've been in DC supporting this industry for about 30 years, and our members are made up of the largest insurance companies, broker dealers, asset managers, law firms, solution providers, fintech companies, everything from A to Z and the value chain of the retirement income process.

Feldman:

And you guys are actively involved with politics and laws and challenging them and fighting for the industry.

Chopus:

It's been our calling card for those 30 years and we've certainly expanded what we do in the last five to 10 years, but advocacy has been and always will be a primary function we provide.

Feldman:

So tell us what's happening with the DOL role.

Chopus:

Well, it appears that the fiduciary role is on the DOL's regulatory agenda for August, and we've had a lot of conversations with DOL leadership and I'm pretty certain they remain committed to that effort as they go forward.

I think they're going to face some headwinds if this is introduced in that timeframe. We've got the issue with Julie Su, pending nomination, of course, the rapidly approaching 2024 election. And even if it does pursue this role as it goes forward, I don't think the DOL should pursue that new role. They've been involved in some of these conversations for 13 or 14 years now with this public debate on standard conduct. And in that timeframe, the regulatory framework has grown in just the last few years alone. We have the SEC's regulation best interest, the NAAC state models enacted in almost 48 states right now. There's just no need for future rulemaking at this point, so we're paying close attention to it as you would imagine. We are prepared in whatever direction that it goes, and we'll see how this plays out for August and beyond.

Feldman:

Do you see any lawsuits maybe happening over this?

Chopus:

Yes, good question. It's probably a little premature to predict that piece of it. We'll need to see what the rule says, what does it look like, how does it look like compared to the 2016 version? But as we would always do as a trade association, we will get together with all of our members and our partners within the industry and determine what the next best steps would be.

Feldman:

So Wayne, what about the SECURE Act? We've got the 2.0, they're talking about 3.0. Tell us about where we're at, what the opportunities are and what probably lies ahead.

Chopus:

Well, there's a ton of optimism right now, and I don't think I'm overstating when I say that the SECURE Act passed in 2019 and 2.0 passed in 2022 are two landmark pieces of retirement legislation, two of the largest pieces passed in the last 15 years. So a lot of optimism as it pertains to that. Those two acts created a lot of mechanisms for businesses to pull together to offer retirement plans and tax incentives for those startup costs as well. SECURE offered a lowering of the barrier to allow lifetime income products into retirement plans and move the RMD age up to 72 among other things. And of course, three years later, as we worked closely on how to improve and enhance the retirement security for all Americans 2.0 passes, which had a path for those with student loans, had the ability for 403b plans to pool. Some new catch-up provisions, brought a level for QLAC and then the RMD age up to 75 among other things. So each of those individually is impressive and important, but collectively it's enormous.

And if I look back to 2020, I guess early 2020, there was a lot of discussion around product innovation and secure and enhancing access for consumers. That was slowed a little bit, obviously by the pandemic as many of our companies had to pivot priorities in the short term. But as I look at where we're moving long-term, product innovation is on the rise right now. This is a really significant change to the private retirement security industry. And we're talking about millions of people impacted with billions of opportunities for lifetime retirement savings and really an inflection point for many Americans looking for that secure and dignified retirement.

Feldman:

So what's next?

Chopus:

So timely question. We just had our first fly-in person in DC in three years last week, and it gave us a chance to not only say thank you to everyone who helped get SECURE 2.0 over the goal line and share some of the success stories with members of Congress, but we do also have a few other next step items. We're not necessarily calling 3.0 yet, but ideas to-

Feldman:

Maybe 2.1.

Chopus:

We'll call it 2.1. Fair enough. One is around parity for investment options in 403b plan participants, and that's actually gone through the House Financial Services Committee already with bipartisan support. So we're working on the Senate side for that as well.

We're talking about a new bill that would allow retirement plan sponsors to have delayed liquidity features and QDIAs or qualified investment alternative options that could enhance options and longevity.

And then a third item tied to allowing all the smallest, or requiring all but the smallest of businesses to offer retirement plan. We've seen study after study that shows that workers respond best when they have retirement savings access through their companies and they're automatically enrolled. So we're certainly supportive of an opt-out provision, but the statistics say that those that come in and are auto-enrolled create better outcomes for their retirement down the road.

All those things together, tax credits, pooled employer plans deferred. [inaudible 00:06:14] is the result of a lot of hard work by many of our member companies, by many members of Congress who care about retirement security for all Americans. And I think it's just a necessary and essential public policy for us as we move forward.

Feldman:

So what do you think about social security or where are we with that and where's that going?

Chopus:

That's a great question. We have a lot of discussions about it, and it's certainly without a doubt, a vital part of our nation's retirement income structure. Probably some looming challenges as we've all heard around the fact that we have fewer workers supporting greater retirees and the math of that, but we believe pretty strongly that Congress will act appropriately to protect the program.

But that said, it's an example of social security in my opinion, was meant to supplement other retirement income sources. And I heard a statistic actually just yesterday, only 14% of Americans now have access to a defined benefit pension plan. A lot of those are governmental workers, so the vast majority of Americans seeking that secure and dignified retirement need to do so, not only with social security, but with other supplemental initiatives, which again is where IRI would come into play continuing to work forward the measures in SECURE 1.0 and 2.0 and whatever we may call the next iteration to make sure that the retirement crisis that exists in America continues to dissipate and that the access to lifetime income and retirement products continues to grow as we move forward.

Feldman:

Okay, Wayne, that was really great information and I just want to thank you for sharing that with our audience today and wish you the best.