Close Close

Regulation and Compliance > Federal Regulation > DOL

Life Industry Reps Try to Speed Shape DOL Rollover Standards Draft

Your article was successfully shared with the contacts you provided.

Officials at the Employee Benefits Security Administration (EBSA) clearly think they have heard from all of the usual investment advice standards interest groups about 5,000 times too often.

They struggled to squeeze all remaining public discussion of their new 401(k) plan rollover standards draft into one day of testimony, held Thursday. Phyllis Borzi, a former EBSA head, called the hearing “rushed and unfair.”


  • Links to resources related to the rollover standards proposal hearing are available here.
  • An article about Phyllis Borzi and other commenters who spoke at the hearing is available here.

But representatives for life insurance industry groups and life insurance companies did their best to persuade EBSA officials to sand off what the life industry speakers see as warts on a beautiful work of regulatory art.

The Background

EBSA — the arm of the U.S. Department of Labor that’s in charge of health and retirement benefits regulations — has developed the new rollover standards proposal in an effort to replace the fiduciary rule regulations that DOL developed during the administration of former President Barack Obama. The standards died when the administration of President Donald Trump declined to defend the standards in court.

EBSA has tried to develop a standard that’s compatible with the U.S. Securities and Exchange Commission’s new Regulation Best Interest standard, and with the National Association of Insurance Commissioners’ effort to develop an annuity sales standard update that would be compatible with Regulation BI.

EBSA has applied its standard proposal to transactions involving rollovers, or moves of assets from 401(k) plans and other retirement plans governed by the Employee Retirement Income Security Act of 1974 (ERISA) to other types of investment arrangements, such as individual retirement accounts or individual annuities.

Life insurers have supported Regulation BI and the NAIC model update, seeing those efforts as being much less hostile toward annuities and sales commissions than the old DOL regulation

Steven Saxon and Jon Breyfogle, who said they spoke for many retirement services providers, have emphasized how much their clients like the EBSA rollover standards proposal.

The New Life Industry Points

But Saxon, Breyfogle and other life industry speakers did have plenty of tweaks to suggest.

Here’s a look at some of the points life speakers made.

James Szostek, a representative from the American Council of Life Insurers, said EBSA officials have mistakenly assumed that any compensation for financial professionals involved in rollover transactions is a fee for investment advice.

More on this topic

Compensation for sales is not the same as compensation for providing sales advice, and simply making a sale, without providing investment advice, should not create a fiduciary relationship under ERISA, according to Szostek.

Bradford Campbell spoke at the hearing for the Association for Advanced Life Underwriting/GAMA International, the Committee of Annuity Insurers, the Indexed Annuity Leadership Council, the Insured Retirement Institute, the National Association for Fixed Annuities, the National Association of Independent Life Brokerage Agencies, and the National Association of Insurance and Financial Advisors.

Campbell emphasized that the life insurance industry is structured in a different way than the securities industry, with insurers, intermediaries, and captive and independent agents.

He contended that the EBSA proposal is based on Reg BI requirements developed for the securities market, and that the requirements are a poor fit for the insurance market.

Saxon and Breyfogle gave examples of specific concerns that they believe should dealt with.

One is the possibility that, in some cases, the proposal could stop financial institutions from giving investment advice to their own clients, by converting a rollover recommendation given in the past into a prohibited transaction.

Saxon and Breyfogle also argued that a consumer should be able talk to a number of different competing financial professionals at a financial professional showcase event without that creating fiduciary relationships with the financial professionals.

Similarly, a consumer should be able to fill out a simple mutual fund selector tool on a financial institution’s website without that action creating a fiduciary relationship with the financial institution, Saxon and Breyfogle said.

— Read DOL Fiduciary Rule Hearing Is Too Rushed, Lawmakers Sayon ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on FacebookLinkedIn and Twitter.