The National Association for Fixed Annuities is scoffing at a new U.S. Department of Labor proposal for letting some independent marketing organizations that distribute indexed annuities serve as financial institutions under the DOL fiduciary standard.
“This is the classic case of too little too late,” NAFA Executive Director Chip Anderson said in a statement Wednesday. “It’s too little because it comes attached with strings and conditions that still make the rule unworkable for most of the fixed annuity industry.”
The DOL fiduciary standard is set to take effect in April. If it were implemented as written, without exemptions, it would shut down indexed annuity IMOs, by prohibiting IMO sellers from earning compensation from insurers for selling indexed annuities to retirement savers.
The DOL published a preview draft of a class exemption for IMO indexed annuity distribution efforts on the web yesterday. The official version of the draft appeared in the Federal Register today.
An IMO is an insurance products distributor that operates separately from an insurance company.
The proposed class exemption would let some large IMOs earn commissions for selling indexed annuities to retirement savers, and those IMOs could share their ability to earn commissions for selling indexed annuities to retirement savers with insurance agents. Other IMOs offering indexed annuities would have to get insurers to act as the financial institutions responsible for supervising the indexed annuity sales process.
NAFA has been a staunch opponent of the fiduciary rule as written, and it filed a suit to block the rule in federal court in June. The group says it will continue its efforts to fight the rule.
Some insurance and finance industry executives are hopeful that President-elect Donald Trump’s administration will move to delay or block the new fiduciary rule.
Compliance teams, however, have had little choice but to prepare fresh training, software and processes that support the new law.
Anderson said the DOL’s proposed exemption does little to ease industry angst because the draft “must still go through notice and comment… There simply will not be enough time once the exemption is final for the fixed annuity industry to reshape itself to meet the exemption’s requirements prior to the April 10 implementation date.”
“No industry of this size can turn on a dime,” Anderson said.
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