Progress and Perils in Washington D.C.: Message from the President
September 17, 2013 by Kim O'Brien
Just like Rodney Dangerfield, the fixed annuity and particularly the fixed indexed annuity “don’t get no respect” – until NOW! Something very important happened this summer in which NAFA played a major role: Senator Orin Hatch (R-Utah) introduced The Secure Annuities for Employee (SAFE) Retirement Act of 2013 (S. 1270).
Under SAFE, state and local governments may adopt a SAFE Retirement Plan. A SAFE plan is a new type of pension plan that delivers lifetime, defined benefit retirement income for public employees with stable, predictable costs for employers and taxpayers. Key features of the Act include:
• Employees receive secure monthly income at retirement for life.
• Employer pension costs are stable, predictable and affordable.
• Pension plan underfunding is not possible.
• The life insurance industry invests the assets, pays the retirement benefits and bears the risks.
• Retirement benefits are protected by a state life insurance guaranty association system.
While most of our members today are focused in the retail annuity space, this bill and NAFA’s role in helping to construct it, is significant for our marketplace. NAFA is hard at work to help more broadly define the products that can be utilized in this space to allow for today’s strong indexed annuities with GLWBs and tomorrow’s innovative annuity income solutions. Even though a SAFE Plan would be provided as an optional solution for state and local governments and could be used alone or in tandem with existing public employee pension plans, we are preparing for a long debate on the merits and specifics of the bill.
With passage into law, the defined pension conversation—for all but federal employees—will be taken out of the hands of the federal government and returned to the individual states, with oversight by state insurance commissioners; solvency protection through the state guaranty associations; and innovation, distribution and education by insurance companies, marketing organizations, and annuity professionals.
For those in our industry who choose not to enter this market, there will still be great sales opportunities. Why wouldn’t an employee who has selected a fixed annuity to provide their pension income be open to purchasing a fixed annuity to supplement through an IRA or non-qualified annuity for legacy planning and supplemental funds?
A side benefit of the bill is that it clarifies that the governance of IRAs is under the Treasury Department and not with the Department of Labor, whose leadership is “assuming” authority in their proposed fiduciary rule. NAFA has submitted many comments on the Department of Labor’s proposed rule and has spent many hours on the Hill educating legislators about the rule’s negative impact on consumers of fixed annuities and advocating the strong consumer protections inherent in the NAIC Suitability Standard. A copy of our Hill Talking Points can be found at nafa.com along with many other great resources.
So unlike Mr. Dangerfield, the millenniums-old fixed annuity is getting the respect it deserves, but we are preparing for a big battle on the Hill with Congress, as well as with the DOL and the SEC, where both agencies are fighting for the fiduciary standard. NAFA believes the effort to impose a broad fiduciary standard is a direct shot across the bow to take control of the entire financial services marketplace—product offering and distribution—away from the effective and proven state insurance structure. But never fear, we will continue our watch and pursue every avenue to make sure that doesn’t happen.
Thank you for supporting fixed annuities.
