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FOR IMMEDIATE RELEASE
OLDWICK - SEPTEMBER 29, 2015 03:23 PM (EDT)
A.M. Best believes that the U.S. Department of Labor’s (DOL) proposal to redefine the Employee Retirement Income Security Act of 1974 (ERISA) fiduciary advice will impact various insurers differently, but in the aggregate, will not become a rating event until there is more clarity on the fiduciary guidelines; however, A.M. Best’s review of the comment letters shows the proposed definition of a fiduciary is seen by the insurance industry as too broad.
The latest Best’s Briefing, titled, “Department of Labor Fiduciary Standard Proposal A Concern For Insurance Companies,” addresses the DOL-released proposed regulations covering fiduciary rules for those providing investment advice with respect to retirement plans and their participants. The initial proposal expands the definition and scope of the parties considered fiduciaries under ERISA and creates a new exception to prohibited transaction rules. The DOL proposal covers not just qualified plans under ERISA, but also includes individual retirement accounts (IRAs) and rollovers within the purview of the proposed rules.
Insurance companies, regulators and associations had until July 2015 to provide written feedback on the DOL proposal. In addition to the numerous comment letters opposing the proposed fiduciary standard, public hearings were also held in August 2015 to allow the insurance industry to voice any opinions. Companies such as Ameriprise Financial, Lincoln Financial Group, MetLife and Primerica also have commented publicly on investor calls and earnings releases to express their concerns about the proposed fiduciary rules. After having reviewed these items, A.M. Best has concluded that the insurance industry believes the DOL proposal needs significant changes to make it workable. Should the proposal go through the way it was originally drafted, the insurance industry is concerned the regulation could limit advice available to small investors, further confuse potential investors and adversely impact the adviser-client relationship. Additionally, costs associated with making changes to products, pricing and compliance practices including greater systems capabilities and additional staffing, would impact future revenues and further increase compliance costs.
The DOL is currently reviewing all the information and testimony provided during the comment period and is expected to have a revised proposal at the end of 2015 or the beginning of 2016. A.M. Best will continue to closely monitor this situation as it unfolds.
For the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=241948 .
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