Washington, D.C. — The comment period closes today (Monday) on a regulation proposed by the Department of Labor that, if imposed in its present form, would have a sweeping impact on insurers, agents and advisors.
The DOL expects thousands of comment letters, and insurers and agents, as well as industry lawyers and trade groups, have been working on comprehensive letters since the 900-page proposal was first published for comment in April.
For example, in a virtually unprecedented move, the American Council of Life Insurers announced Friday that it will hold a teleconference Wednesday to explain to reporters its decision to brief them on the implications of the rule.
The ACLI explained that the proposal, if adopted in its present form, could “drive up the cost of financial advice at a time when it is most needed by millions of Americans and small businesses.”
Among other concerns, the ACLI said it could reduce choices in retirement plan marketplace and make it extremely hard for people to access annuities, which represent the sole means available in the marketplace today for retirees to secure guaranteed income for life.
The next public step will be a public hearing the week of Aug. 10, followed by publication of a hearing transcript. After the transcript is published, an additional two-week comment period will open.
Significant criticism of the proposal has been voiced in Congress, and there are several bills, either introduced or cases where members of Congress have said they plan to introduce, that would sideline the proposal in one way or another.
One significant initiative is an effort to defund work on the proposal contained in bills reported out by both the House and Senate Appropriations Committee.
However, in a comment that represents a consensus, Thomas G. Gallagher, an analyst at Credit Suisse, said that, “We believe that the significant backing by the White House will ultimately result in the adoption of the proposal without much dilution to the current version.”
Gallagher said that the DOL’s primary goal “is to reduce the costs associated with individuals who are rolling money out of employer sponsored retirement plans and particularly costs associated with conflicts of interest.”
The final rule could go into effect by next July as the Obama administration works to ensure that this signature consumer protection is in place before he leaves office in January 2017.
Thomas E. Perez, DOL secretary, has made clear that the agency and the administration will listen carefully to industry concerns, and modifications are seen as likely. But the core principles of the rule are seen as a remaining impact in any final regulation.
Meanwhile, industry lawyers and analysts speculate that that in order to win the industry’s grudging support, it is more likely to go into effect as late as December 2016. And, application of certain provisions could be further delayed, industry lawyers and analysts suggest, in order to reduce congressional pressure to substantively modify or kill a final rule.
According to industry lawyers and analysts, two key areas will be the sale of variable annuities and on the system used to compensate agents and advisors selling insurance and investment products into retirement accounts covered by the Employee Retirement Income Security Act of 1974 (ERISA).