IRI: Retirement Funds at Mercy of Fiduciary Rule

The Insured Retirement Institute unveiled an ambitious agenda Monday to expand access to retirement savings programs on several fronts.

Unfortunately, President and CEO Cathy Weatherford said, those efforts are countered by the Department of Labor’s fiduciary rule. While the fiduciary rule is likely to be published this year, Weatherford said the IRI will continue to lobby to shape its contents.

“We want to be sure that professional financial advice is available,” she said of the overall IRI agenda. “We know that good financial advice leads Americans to save more and to better prepare for retirement and to be more mindful in working with a financial professional to achieve their goals.”

The DOL proposed new fiduciary rules in April, which cover advice provided regarding qualified retirement employer-sponsored plans and individual retirement accounts.

DOL officials and public interest groups say the proposed rules, which would impose a fiduciary standard of care on financial advisors dealing with retirement accounts, are necessary to protect retirement investors from high commissions.

Critics say the DOL is trying to force the industry to move from a commission- to a fee-based model. The rule allows for commissions via a prohibited transaction exemption, but IRI officials said it isn’t realistic due to the burdensome regulations.

“Every ERISA expert that we have consulted with ... indicated that the rule effectively bans commissions, so that’s an area where we have disagreement,” said Lee Covington, IRI senior vice president and general counsel.

The DOL is expected to publish a final rule by May 1, which will mean insurers have until the end of the year to come into compliance with various reporting and recordkeeping mandates. DOL officials have said it will make changes to the rule based on feedback it received throughout 2015.

IRI has two main changes it wants to see from the final DOL rule, Weatherford said: a commitment from the department that commissions and proprietary products are both permissible with as little regulation as possible.

Forthcoming IRI survey data will show why these changes are important, she added. That data shows that just 27 percent of baby boomers are “highly confident that” their retirement savings will last, while 40 percent report they have not put any savings away.

Among millennials, only 29 percent report any savings for retirement, Weatherford said.

“We know that these stats are troubling and they demonstrate that we still have some retirement security challenges in America and we need to contend with them,” she said. “It’s really about expanding and providing greater opportunities and access for all Americans to save for retirement.”

Here are some additional highlights from the IRI policy agenda:

• Expanding access to workplace plans: Workplace plans are a powerful tool in helping Americans save and prepare for their retirement years. Policymakers should continue to explore ways to make retirement plans available to workers who currently lack access to a workplace plan. One proposal, supported by IRI, is to make multiple employer plans (MEPs) available to small businesses.
• Increasing access to lifetime income options: Lifetime income strategies offer retirement savers the ability to secure guaranteed retirement income that cannot be outlived. Including lifetime income options in workplace plans would increase consumers’ access to these strategies, but plan sponsors need clear rules about selecting lifetime income products to make available in their plans. IRI encourages regulators to clarify safe harbor rules so employers can be confident they have met their responsibilities.
• Improving access to retirement planning education and information: Providing workers with lifetime income estimates, which show how much monthly income a nest egg can generate in retirement, will lead to more informed decision making. IRI encourages the DOL to advance a rule that would require including these estimates on benefit statements. IRI also supports related legislation, the Lifetime Income Disclosure Act, which would require the DOL to move forward with this rulemaking.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.