LABOR DEPARTMENT WITHDRAWS ANNUITY SAFE HARBOR DIRECT FINAL RULE

Action Taken After Comments Filed by IRI, Others

 WASHINGTON, D.C. – The U.S. Department of Labor (DOL) withdrew a direct final rule that would have eliminated a long-standing safe harbor regulation after the Insured Retirement Institute (IRI) and others explained that the safe harbor regulation continues to play an important and complementary role in making annuities available through workplace retirement plans.

IRI argued in comments filed July 31 that the removal of a regulatory safe harbor 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 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.

“We’re grateful that DOL withdrew this direct final rule,” said Emily Micale, Director, Regulatory Affairs, IRI. “We appreciate that DOL and the Trump Administration are seeking ways to reduce unnecessary regulatory burdens. However, the direct final rule would make the regulatory climate more difficult for financial professionals and plan sponsors and potentially would have negatively affected retirement savers’ access to beneficial retirement products and strategies.”

In its comments, IRI explained that many plan sponsors and service providers have developed internal procedures, oversight processes, and fiduciary practices based on the safe harbor framework established by the 2006 safe harbor 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.

DOL received significant adverse comments on the direct final rule, which required its withdrawal. Significant adverse comments oppose the rule and raise, alone or in combination, a serious enough issue related to each of the independent grounds for the rule that a substantive response is required.

“Withdrawing this direct final rule is the right call,” Micale said. “We urge DOL not to revisit this issue and keep this necessary safe harbor for the benefit of retirement savers. IRI looks forward to working with DOL to discuss ways to streamline regulations and to improve retirement security for workers and retirees.”

(July 31 IRI press release: IRI Urges Labor Department to Keep Safe Harbor Rule)

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Contact: Dan Zielinski