SECURE Act Opens Door For Annuities — Will They Walk Through? – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.ā„¢

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Top Stories
Topics
    • Life Insurance News
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Articles
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
Sign in or register to be anĀ INNsider.
  • Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
  • Insider Pro
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Annuity News
Top Stories RSS Get our newsletter
Order Prints
January 17, 2020 Top Stories No comments
Share
Share
Tweet
Email

SECURE Act Opens Door For Annuities — Will They Walk Through?

By John Hilton

Now that the SECURE Act has become law, many within the industry are curious to see if it will lead to widespread use of annuities in retirement plans.

Ben Norquist of Convergent Retirement Plan Solutions, said that's a definite maybe.

Speaking during a webinar sponsored by the LIMRA Secure Retirement Institute, Norquist said the fiduciary liabilities for plan sponsors could be a sticking point.

Related stories

  • Study: Does pessimism really suppress annuity sales?
  • Sweet streams of income: ChatGPT, the bard of annuities

"I don't feel like I have a solid grasp yet on the extent to which the plan sponsor community at the end of the day 5, 10, 15 years from now is going to fully embrace a role that keeps them in a in a fiduciary capacity through retirement," he said. "Obviously some will, and maybe it'll turn the corner where it just becomes the norm."

But first, there will likely be a long evolution phase that includes more simplified products and further clarification of compensation issues in the various distribution channels, Norquist added.

"I wouldn't be surprised if we see more legislative action in the future to promote the use of annuitized retirement income," he said. "I think in some European countries there's even situations where you default into an annuitized form of payment, but you can opt-out under certain circumstances. I don't think we're there yet."

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was included in the massive $1.4 trillion spending bill signed by President Donald Trump at the end of the year.

Just getting the rules loosened for annuities in plans is "a big win for the insurance industry," Norquist said.

'Remains To Be Seen'

While companies already can offer annuities in their 401(k) lineups, just 9% do, according to the Plan Sponsor Council of America. The SECURE Act aims to boost that figure, and improve retirement readiness, by eliminating companies’ fear of legal liability if the annuity provider fails or otherwise fails to deliver.

The act creates a safe harbor that employers can use when choosing a group annuity to include as an investment within a defined-contribution plan, with new provider-selection rules, writes Stephen Miller for the Society of Human Resource Management:

For instance, the legislation will protect employers from liability if they select an annuity provider that, among other requirements, for the preceding seven years has:

  • Been licensed by the state insurance commissioner to offer guaranteed retirement income contracts.
  • Filed audited financial statements in accordance with state laws.
  • Maintained reserves that satisfy all the statutory requirements of all states where the annuity provider does business.

"It requires that they select a financially capable provider, but allows basically the employer to rely on documentation provided by the provider," Norquist said.

The plan sponsor does have to do a cost-benefit analysis, he added. That does not mean finding the lowest-cost products.

"Are we going to see a flood of plan sponsors looking to embrace lifetime income products?" Norquist asked. "I think it remains to be seen. I think a lot of carriers are hoping for that. To a certain extent, I think some of the lifetime income solutions are historically at least more of a push by the financial services industry than a pull by the plan sponsor community.

"That doesn't mean that they won't ultimately be embraced and become widespread. But to me, the verdict is still out."

Parsing The Bill

The SECURE Act is "the most significant retirement reform since the Pension Protection Act of 2006," Norquist said. The legislation contains a grab bag of changes across the retirement planning spectrum. Other big changes include:

-- More time in IRAs and 401(k)s. The bill raises the age for required minimum distributions (RMDs) from 70 1/2 to 72 years old.

-- Grant older workers benefits. As long as you're working, you can still contribute to your IRA after age 70 1/2. Previously, you couldn't.

-- Boost small-business 401(k)s. Small businesses can now band together in group plans.

-- 529 plans. They can be used to repay up to $10,000 in student loans, as well as for siblings.

The law also enhances automatic enrollment and auto-escalation, allowing companies to enroll employees automatically into a retirement plan at a 6% rate of salary contribution, up from 3%.

Employers can now raise employee contributions to a maximum of 15% of annual pay. Workers can opt out of these features at any time.

A final positive: The SECURE Act would allow investors early access to IRA funds for any "qualified birth or adoption" by creating a new exception to the 10% penalty.

However, the money is still subject to tax. The $5,000 amount is the lifetime limit, and applies to any distribution from the retirement account within one year from the date of birth or legal adoption. The exception applies to children under age 18, or physically or mentally disabled and incapable of self-support.

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

Ā© Entire contents copyright 2019 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

Older

Unlocking The Value Of Closed Blocks Of Business

Newer

Report: Barclays Warns Investors Of A Warren Presidency

Advisor News

  • Fed slows rate hikes even as Powell says there's more work to do
  • Mortgage rates in U.S. fall again, hit 6.09%
  • 1 in 3 Americans struggling financially but goal-setting is a game-changer
  • Advisors bet on US stocks to outperform in 2023 amid tech rebound
  • Investors want more ESG information from companies
More Advisor News

Annuity News

  • Study: Does pessimism really suppress annuity sales?
  • Sweet streams of income: ChatGPT, the bard of annuities
  • F&G Annuities & Life announces equity investment in life IMO SYNCIS
  • Investors scrambling to lock in rates propel annuity sales to record highs
  • North American and Annexus launch new fixed index annuity
Sponsor
More Annuity News

Health/Employee Benefits News

  • State: all insurers failed to comply with Oregon Reproductive Health Equity Act
  • Will plan fix California health care?
  • Insurance giant Elevance to move into 15th state
  • Medicare card scam targets seniors for personal info
  • Yes, states are re-checking Medicaid and CHIP eligibility starting in April
More Health/Employee Benefits News

Life Insurance News

  • Maid's son tells judge Alex Murdaugh took $4M for her death
  • Chris Wilson tells court former friend Murdaugh confessed he was ā€˜stealing money’
  • State's motive testimony could prolong Alex Murdaugh murder trial
  • Equitable expands portfolio in VUL market
  • New date set for billionaire suspect accused of bribing state cabinet member
More Life Insurance News

- Presented By -

Top Read Stories

  • Chicago news roundup: PPP fraud uncovered in Chicago, informant reveals $100K bounty on FBG Duck and more
  • Gov. Carney: Enrollment on Delaware's Health Insurance Marketplace for 2023 Reaches All-Time High
  • 25 people charged in fake nursing diploma operation
  • Connecticut addressing broker shortage amid The Great Unwinding
  • Missouri Department of Insurance: Over $24 Million Returned To Missouri Insurance Consumers In 2022
More Top Read Stories >

FEATURED OFFERS

Meet Encova Life
We know agents matter. You can count on our life team to be high tech, high touch and responsive.

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus

Top Sections

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
Ā© 2023 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.