Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor
The California State Capitol in Sacramento, California. (Photo: Sundry Photography/Adobe Stock)

Life Health > Annuities > Fixed Annuities

Consumer Groups Attack Annuity Bill in California

By Allison Bell

X
Your article was successfully shared with the contacts you provided.

Two California groups that support the U.S. Labor Department’s fiduciary rule effort say officials in their state are rushing an annuity sales rule alternative through the state Legislature.

The Consumer Federation of California and the Life Insurance Consumer Advocacy Center assert in a new joint commentary that they believe that California Insurance Commissioner Ricardo Lara and the California Department of Insurance are supporting SB 263, the California version of a National Association of Insurance Commissioners model bill.

Sen. Bill Dodd, D-Napa, California, introduced S. 263 in March 2023. The consumer federation, the advocacy center and other opponents succeeded at stalling action in October.

Robert Herrell, the federation’s executive director, said that the possibility that the bill could become law stinks.

“It feels like the fix is in between the California insurance regulator, the life and annuity insurance industry he’s supposed to be regulating, and Senator Dodd,” Herrell said.

What it means: California may soon adopt annuity rules similar to the version most other states have adopted.

The Securities and Exchange Commission already regulates variable annuity sales.

Some state officials believe that adopting the same annuity sales rules throughout the country could keep SEC from using a Dodd-Frank Act provision to get jurisdiction over nonvariable annuities.

Fiduciary rule vs. best interest: The Labor Department wants to apply a fiduciary standard to rollovers from retirement plans and IRAs into annuities, meaning that rollover annuity providers would have to put the savers’ interests first and possibly face lawsuits if annuity results are disappointing.

The NAIC model, based on an update of an existing model, would require annuity providers to act in a consumer’s best interest, meaning that they would have to provide more explanations and disclosures.

The California consumer group perspective: Life insurers and agent groups support passage of SB 263.

Many financial planner groups and consumer groups, including the Consumer Federation of California and the Life Insurance Consumer Advocacy Center, oppose it.

SB 263, “largely written by insurers, would keep consumers uninformed and vulnerable to being victimized by bad insurance sales practices,” the federation and the advocacy center say.

California’s own rules would still apply to any annuity sales not involving retirement account rollovers, the groups note.

Brian Brosnahan, executive director of the advocacy center, suggested that rules based on the Labor Department proposal, the SEC’s Regulation Best Interest or New York’s rules would be better than SB 263.

The California State Capitol in Sacramento, California. (Photo: Sundry Photography/Adobe Stock)

Allison Bell

Think_Allison

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.