IRI URGES LABOR DEPARTMENT TO KEEP SAFE HARBOR RULE

Withdrawal Could Disrupt Inclusion of Annuities in Workplace Retirement Plans

WASHINGTON, D.C. – A U.S. Department of Labor (DOL) proposal to withdraw a long-standing safe harbor regulation could disrupt the inclusion of annuities into workplace retirement plans, according to the Insured Retirement Institute (IRI).

DOL proposed to eliminate various rules that they cited as redundant and no longer necessary.

However, in comments filed today, IRI said that the proposed withdrawal of a long-standing regulatory safe harbor provision for the selection of annuity providers for benefit distributions from individual account retirement plans could, “unintentionally lead to reluctance in offering lifetime income options, which would be contrary to the goals of the SECURE Act and SECURE 2.0 in promoting guaranteed retirement income.”

IRI said that the regulatory safe harbor, established under the Pension Protection Act of 2006, provides fiduciaries with a clear and comprehensive standard for selecting both annuity providers and contracts. IRI noted that a statutory safe harbor enacted under the SECURE Act of 2019 primarily addresses the financial viability of insurers, while the regulatory safe harbor encompasses broader fiduciary duties regarding both the provider and the annuity contract itself.

“Retaining the Regulation’s safe harbor will help ensure that fiduciaries have access to well-understood and time-tested guidance,” wrote Emily Micale, Director, Regulatory Affairs at IRI. “Many plan sponsors and service providers have developed internal procedures, oversight processes, and fiduciary practices based on the safe harbor framework established by the Regulation. These standards continue to provide value by reinforcing prudent selection criteria, promoting consistent practices, and reducing ambiguity in the application of ERISA’s fiduciary duties.”

IRI also said that maintaining both safe harbors affords fiduciaries flexibility to choose the compliance pathway best suited to their plan design, participant demographics, and product offerings. Additionally, IRI noted that some fiduciaries may find greater comfort and confidence following their established fiduciary processes under the regulatory safe harbor when making lifetime income options available to their participants.

Micale concluded, “IRI strongly supports efforts to ensure that regulatory standards are clear, consistent, and supportive of retirement income security. Retaining the Regulation’s safe harbor would serve these goals and avoid unnecessary disruption to fiduciary practices that are currently working effectively.”

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Contact: Dan Zielinski