The American Council of Life Insurers is asking the Department of Labor to include guaranteed insurance products among those that could be used for automatic enrollment under the Pension Protection Act.
The ACLI argued its case in a comment letter on proposed regulations for implementing the Pension Protection Act, which was signed into law in August, specifically clarifying which products are considered as qualified default investment alternatives, or QDIAs, that could be used in automatic enrollment plans.
“Group annuities, especially fixed annuities and other guaranteed insurance products, have been among the foremost investment products offered to pension plans subject to regulation under the Employee Retirement Income Security Act of 1974, as amended,” wrote Ann Cammack, ACLI’s senior vice president for tax and security, in the comment letter. “Regrettably, under the Department’s proposed regulation, questions have arisen regarding the permissibility of offering annuities and other guaranteed insurance products as default investment alternatives.”
Specifically, ACLI complains that the department’s failure to list guaranteed insurance products such as fixed annuity contracts, stable value funds and other guaranteed products on the list of products that can be considered as QDIAs is “an unacceptable shortcoming in the proposed regulation that must be addressed.”
The use of guaranteed products as a default investment for plans is already widespread and recognized by the department in other areas, Cammack notes in the letter, citing a survey of 1,900 defined contribution plan sponsors conducted by the Vanguard Center for Retirement Research that found more than 81% of plans with default investment options selected a fixed income vehicle.