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13 things on the IRI’s regulatory agenda

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IRI President and CEO Cathy Weatherford applauded the Obama administration Tuesday for making retirement reform a priority and suggested many of the issues enjoy a rare distinction on Capitol Hill — bipartisan support.

That said, the lobbying organization will no doubt take part in the counterassault to President Obama’s proposal to cap contributions to retirement accounts once individuals reach a balance of $3.4 million.

Also read: Obama to push retirement reforms

And the group, which represents the interests of insurers, broker-dealers, asset managers and financial professionals, stands at the ready to push back against an overreaching fiduciary standard, if indeed the Department of Labor’s final rule amounts to as much. 

Here, then, is a closer look at the IRI’s 2015 regulatory agenda: 1. Maintain tax-deferred treatment for retirement savings. IRI wants Congress to maintain the current tax treatment for retirement savings to help workers prepare for a more secure retirement. Research conducted by IRI overwhelmingly shows Americans would save less if tax deferral were reduced or eliminated.

 dol building2. Protect access to professional financial help (aka counter the DOL’s fiduciary rule, if need be). The Department of Labor has been considering making changes to the definition of a “fiduciary” – changes that IRI believes would prevent consumers from accessing these services through full-service brokerage accounts. Research, it says, shows that those who work with a financial professional have better savings habits and exhibit sounder retirement planning behaviors.

3. Clarify employer fiduciary responsibility on longevity annuities.Employers need clear rules regarding their selection of lifetime income annuity products they select for retirement plans. Current regulations ask too much of employers in assessing insurance companies viability to meet future obligations. 

4. Enable annuity portability. The tax code needs to be amended to make a recordkeeping change a “distributable” event. This will assure workers they don’t lose guarantees when sponsors change annuities or service providers.  5. Provide multiple employer plans with lifetime income options. Bipartisan support exists to expand MEPs to more employers, IRI says. It wants Congress to require lifetime income options in all MEPs.

auto escalate6. Require lifetime income estimates on benefit statements. The DOL is working on such a rule, and Congress has introduced the Lifetime Income Disclosure Act, which would do the same. IRI research says 90 percent of workers say the rule would be helpful, and another 75 percent said it would encourage more savings. 

7. Increase auto-enrollment and escalation default rates. The current default rate for auto-enrollment is 3 percent – too low, according to the IRI. New legislation should set the rate at 6 percent, and allow for auto-escalation up to 15 percent of income. 

8. Encourage electronic disclosure for retirement plans. IRI says Congress should permit electronic delivery to be the default option for providing required disclosures to plan participants as long at they can opt out.  9. Update RMD rules to reflect longer lifespans. Legislation should be enacted to increase the RMD age from 70 1/2 to at least 75 and mortality tables should be updated to reflect longer life expectancies. For a married couple age 65, there is a 60 percent chance of at least one spouse living to 90, and a 30 percent chance of at least one spouse living to 95. 

annuities10. Advance partial annuitization rule. Treasury released a proposed rule in early 2012 that would make it easier for pension plan participants to receive part of their benefits in the form of an annuity. IRI is urging regulators to finalize and adopt the rule in early 2015 to provide consumers with greater flexibility regarding their retirement plan benefit options. 

11. Adopt a variable annuity summary prospectus and annual update.This would improve consumers’ understanding of investment choices and facilitate better decision-making with lifetime income products. Consumers want a “friendlier and shorter” prospectus. The SEC has indicated it would propose such a rule. IRI is urging it to do so immediately. 

12. Implement national insurance licensing clearinghouse. The National Association of Registered and Brokers Reform Act has been passed, allowing financial professionals registered with state insurance agencies to sell annuities in other states, without having to register there. IRI’s focus is now on implementing the law. 

13. Ensure FINRA data collection program efficiently enhances consumer protection. FINRA’s proposed data collection program will not initially include information on variable annuities, but the regulator has said it may expand the program to include them in the future. IRI urges FINRA to consider the potential costs to doing so, and ensure the program would meet shared goals of enhancing consumer protection.