Some insurance industry experts are saying that California’s adoption this week of the National Association of Insurance Commissioners (NAIC) best interest model for annuity transactions further negates the need for the DOL’s proposed retirement security rule.
The fact that California—a blue state with the largest population of any state in the country—this week became the 45th state to adopt the best interest regulation that insurance producers must follow when recommending annuity products to their clients may have some deeper implications than being just another state to adopt the model.
“California’s adoption of the NAIC best interest model further diminishes the need for DOL’s flawed, overreaching proposal, and it should be withdrawn.”
IRI’s Wayne Chopus
“We’ve said repeatedly that the proposed DOL investment advice rule was unnecessary and redundant,” said Wayne Chopus, President and CEO of the Insured Retirement Institute (IRI), in a Feb. 29 statement. “California’s adoption of the NAIC best interest model further diminishes the need for DOL’s flawed, overreaching proposal, and it should be withdrawn.”
On Thursday, California Governor Gavin Newsom signed S.B. 263 into law, meaning that more than 90% of the U.S. population is now covered by the consumer protection law. Like the NAIC model, the new California law requires insurance producers to act in clients’ best interest. The NAIC model aligns with the U.S. Securities and Exchange Commission’s Regulation Best Interest (Reg BI).
“California’s adoption of the NAIC model best interest regulation is a major step forward for consumer protection,” Chopus said. “Together with the SEC’s Reg BI, our nation has established a comprehensive federal-state consumer protection framework.”
Kevin Mayeux, CAE, CEO of the National Association of Insurance and Financial Advisors (NAIFA), called California’s move a “monumental win for consumers and one that NAIFA wholeheartedly applauds,” in a statement released today.
“Together with the Securities and Exchange Commission’s Regulation Best Interest, which creates a best interest standard for retirement investors in every state, the NAIC model offers robust protections and promotes retirement security for American families. NAIFA encourages all 50 states to adopt the NAIC model.”
It appears all 50 states will indeed be on board by the end of 2024. Indiana has finalized its best interest rule, which is expected to be published by March 6. Only Louisiana, Missouri, Nevada and New Jersey have not yet adopted the NAIC model (along with the District of Columbia) while New York separately adopted a fiduciary standard.
“We anticipate the remaining states will adopt the model by year end, with several doing so in the next few weeks,” says a joint statement released today by a coalition of eight organizations expressing their support for the new California law strengthening protections for annuity consumers.
“It enhances the standards financial professionals in California must follow while also safeguarding consumers’ access to, and information about, annuities, the only financial product in the marketplace that can provide guaranteed income for life. With these new protections, millions of savers in California can be confident that financial professionals must act in the consumer’s best interest when offering recommendations about annuities,” the statement said.
The organizations include IRI, NAIFA, the American Council of Life Insurers (ACLI), Association of California Life and Health Insurance Companies (ACLHIC), Finseca, National Association for Fixed Annuities (NAFA), Federation of Americans for Consumer Choice (FACC), and Independent Insurance Agents & Brokers of California (IIABCal).
IRI’s Chopus acknowledged and thanked California Sen. Bill Dodd, who sponsored the legislation, and California Insurance Commissioner Ricardo Lara, who supported its passage. He also noted the efforts of the ACLHIC for leading the broad industry coalition that advocated for the law.
“This was a well-coordinated effort by a united industry coalition, led by ACLHIC, that passed a significant consumer protection measure without a single ‘no’ vote in the Legislature,” Chopus said.
The DOL’s proposed new rule aimed at enhancing retirement security for savers by updating the definition of what constitutes an investment advice fiduciary under ERISA remains in the review stage. The DOL fielded more than 19,000 comments before the comment period concluded on Jan. 2, 2024.
SEE ALSO:
• DOL Fiduciary Rule Released; Industry Reaction Pours In
• Critics Speak Out Against DOL Retirement Security Proposal During House Committee Hearing
• Retirement Security Rule Would Cost 11 Times More than DOL Estimate: Report
• DOL Retirement Security Hearing: Groups Express Both Support and Strong Opposition