The life insurance industry is asking the Bush administration to step in and delay implementation if a final Department of Labor rule rejects the use of annuities and guaranteed investment contracts as default investments for 401(k)s.
The contingency plan came to light in a letter the American Council of Life Insurers wrote on behalf of its 373 members to the Office of Management and Budget that was released to National Underwriter.
“The American Council of Life Insurers and its members have significant concerns regarding the U.S. Department of Labor, Employee Benefits Security Administration’s proposed regulation addressing default investment alternatives under participant-directed 401(k) plans,” writes Anne Cammack, ACLI senior vice president, taxes & retirement security, in the letter.
If the final rule “materially follows” the proposed regulation with respect to qualified default investment alternatives, OMB should “return the default investment regulation to EBSA for further consideration of the matters discussed below.”
In addition, Cammack asks OMB officials to meet with ACLI to “discuss our concerns with you and members of your staff at your earliest convenience.”
Besides the DOL, the proposal puts insurers at odds with the mutual fund industry, which supports the rule because its members would likely gain windfall customers if insurance products were barred from competing with such mutual fund products as balanced funds, life-cycle funds and a diversified portfolio of funds managed by an outside advisor–the 3 default options spelled out in the proposed rule.
Responding to the ACLI statement, F. Gregory Ahern, a spokesman for the Investment Company Institute, said the DOL “got it right the first time.”
He added, “It would be wrong to weaken that regulation by adding other products–including money-market funds and other stable-value products–that don’t meet the law’s objectives.
“We’re confident that the Labor Department will recognize the need to adhere to the pension act’s goals, and we stand ready to work with them in any way we can to help bring the regulation to completion,” Ahern said.