ACLI To DOL: Include Guaranteed Products For Automatic Enrollment

"The department itself has recognized in numerous circumstances that the use of capital preservation funds will satisfy ERISA's fiduciary requirements where participants have not made an affirmative investment election," she added. "Specifically, the department's regulations on automatic rollovers provide safe harbor relief in connection with cash outs of small account balances of terminated employees that are rolled over into an individual retirement account, which in turn is invested in a product designed to 'preserve principal and provide a reasonable rate of return, whether or not such return is guaranteed, consistent with liquidity.'"

Cammack also argued that the language of the Pension Protection Act itself supports including guaranteed products as QDIAs. "We are surprised and frustrated that the department failed to take into account the explicit language of the PPA, specifically directing the department to issue regulations that address the 'appropriateness of designating default investments that include a mix of asset classes consistent with capital preservation or long term capital appreciation, or a blend of both,'" Cammack wrote, adding it is "simply unfathomable" to the ACLI that the department would read the statute to mean that guaranteed products should not be included as QDIAs. "If Congress had deemed guaranteed products unworthy of QDIA status," she said, "Congress would have explicitly said so."

Additionally, Cammack said, ACLI is concerned that the proposed regulations would hamper innovation in the market by establishing only certain existing products as QDIAs. "Instead, the department's selection and description of QDIA vehicles should be flexible and based on more general criteria rather than specific conditions," she said. "In this way, the regulation will not have the unintended consequence of stifling the creativity that could lead to the next generation of innovative retirement products."

ACLI also requested a public hearing on the proposed regulations to discuss what Cammack called the "significant concerns" of ACLI members.