A bill that could significantly boost adoption of annuities in employer-sponsored retirement plans may be enacted before Congress goes on recess in August.
Marc Cadin, CEO of the Association for Advanced Life Underwriting, offered that optimistic forecast during an interview with Life Annuity Specialist at the organization’s annual meeting in Washington, D.C. Underpinning his assessment is broad bipartisan for a Senate version of the legislation, known as the Retirement Enhancement and Savings Act, or RESA.
“I think it’s going to happen this year, for sure,” says Cadin. “If I were to make a prediction, I would say before the summer.”
The legislation modifies requirements for tax-advantaged retirement savings accounts like 401(k) and 403(b) plans. Proposed changes include provisions that cut disincentives for automatically enrolling small business employees in a 401(k) plan, permit auto enrollment in emergency savings accounts, provide an expanded tax credit to subsidize the cost of kick-starting a retirement plan, and make it easier to select an annuity provider.
Some changes would reduce the potential fiduciary liability of plan sponsors by offering them a “safe harbor” or guidelines for offering workers an in-plan annuity without fear of subsequent litigation.
In addition to the Association for Advanced Life Underwriting, supporters of the Senate bill include the American Council of Life Insurers, the Insured Retirement Institute and National Association of
Despite both Democratic and Republican backing for the Senate bill — and for similar retirement provisions of a separate House bill that passed last year, the Family Savings Act — the legislation isn’t yet a done deal. One thing that could slow passage, Cadin cautions, is the attaching of amendments to the bill.
Assuming that the Senate bill gets enacted, says Cadin, it could spur “explosive growth in the retirement business.” He adds, “That’s what we’re looking for; we’re not for incrementalism.”
AALU Chief Operating Officer Marc Cadin.
Advisors at the association’s annual meeting offered differing opinions about the bill’s potential impact.
But Stephen Guinan, a managing partner for Northwestern Mutual Eastern Pennsylvania doesn’t think that in- plan annuities will gain much traction in employer-sponsored retirement savings plans.
“I don’t think it will have a dramatic impact on sales,” he says. “I view the defined contribution plan as an accumulation tool. Except for retirement savers who have a low risk tolerance, I don’t really a see a place for annuities in an employer-sponsored plan.”
Cadin also said that the Association for Advanced Life Underwriting is sympathetic to the position of the New York arm of the National Association of Insurance and Financial Advisors, which opposes the Empire State’s Best Interest Rule, also known as a Regulation 187. As reported, NAIFA New York has joined with two organizations — the Big I and the Professional Insurance Agents of New York — in a now consolidated suit against the Department of Financial Services. The organizations argue that the best interest rule is unconstitutional and would depress life insurance and annuity sales.
But Cadin sees litigation as counterproductive.
“It’s our view that suing a regulator in this environment is not the best course of action,” he says. “What we have to do is find a way to come together as an industry around a set of reasonable regulations that provide clear rules of the road, don’t create unlimited liability and preserve consumer choice.”
Turning to best interest rules being considered in other states, including Maryland, Nevada and New Jersey, he adds that a patchwork quilt of regulations isn’t sustainable. “You can’t have 50 different rules,” he says. “It would be a disaster for consumers.”
To realize the association’s other advocacy objectives — securing estate tax permanence and certainty, protecting corporate- and bank-owned life insurance and the current tax treatment of non-qualified deferred compensation plans, and defending against detrimental changes to taxation of insurers stemming from the 2017 tax reform law — Cadin says that the group is working more collaboratively with other organizations, including the National Association of Insurance and Financial Advisors and the American Council of Life Insurers.
He adds that the Association for Advanced Life Underwriting has also doubled its membership — the total now stands at 4,000-plus. Cadin attributes the gain to the creation of a new enterprise membership category; M Financial Group, a company composed of 145-plus member firms, became an inaugural member of the new category in March.
“Enterprise membership insures that everyone within a particular group is a member,” said David Byers, a managing principal of Capital Strategies Group, an M Financial firm, during a general session on Sunday. “Our goal is to create not just numbers, but a new culture of advocacy within M [Financial] so that every single person who is impacted by AALU’s advocacy can speak out for our cause.”
Cadin says the association is also looking to challenge prominent critics of the industry’s products — Suze Orman, Ken Fisher, Dave Ramsey — people he described as “gadflies who spew bad advice.”
The pushback will entail sharing stories through various media about how people’s lives have been changed by the industry’s products, and not simply, as in the past, describing the critics’ information as misleading or inaccurate, according to Cadin.
“In the coming weeks, we’re going to we have some pretty bold ideas about changing how the profession is perceived,” he says.
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