Iowa Congressional Delegation Expresses Concern to Labor Department Over Fixed Indexed Annuity Regulation, Effects on Retirement Income Option
WASHINGTON – Led by Sen. Chuck Grassley, all six members of the Iowa congressional delegation today expressed alarm to the Labor Department over a regulation that could limit a retirement income tool that is popular with American families. The Administration’s new fiduciary regulation subjects fixed indexed annuities to a level of stricter regulation than other forms of fixed annuities without explaining the basis for the change, raising the prospect that some financial agents might stop offering fixed indexed annuities altogether.
“This is concerning to us because annuities play an important role for many Americans in ensuring a secure retirement,” Sen. Grassley, Sen. Joni Ernst and Reps. David Young, Dave Loebsack, Rod Blum and Steve King wrote to Labor Secretary Thomas Perez. “Annuities are often attractive for this purpose due to their unique ability to provide a guaranteed income stream that cannot be outlived. To ensure that annuities remain a viable option, it is important to maintain a strong, robust, and competitive market for all annuity products. … We urge DOL to work with the fixed indexed annuity providers to fashion … a workable solution that will protect the best interest of consumers while preserving the distribution network for these annuities.”
The delegation members said the Labor Department not only disregarded their previous recommendations on how to handle fixed indexed annuities in the regulation, but also went in the opposite direction to restrict them.
“This complete one hundred and eighty degree turn on the treatment of fixed indexed annuities in the final regulations raises questions as to whether the comment period garnered sufficient input on this subject for DOL to make an informed decision,” the delegation members wrote.
In addition, it is unclear on what legal basis the Labor Department determined it was proper to distinguish between types of fixed annuities, the letter states. “In fact, Congress affirmatively weighed in on this issue during the 2010 financial reform bill with the adoption of an amendment that effectively rebuffed a similar effort by the Securities and Exchange Commission to single out fixed indexed annuities from other fixed annuities,” the letter says.
Last year, American families bought more than $53 billion of fixed indexed annuities. More than a third of those annuities were bought from Iowa-based insurers.
The Iowa congressional delegation letter is available here.