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DOL Proposes Easing Fiduciary Rule on Some Annuities

By Alex Padalka January 23, 2017

The Department of Labor has proposed easing the fiduciary rule to allow some sellers of fixed annuities to collect commissions.

The rule requires retirement brokers put clients’ interest first but allows commissions on the sales of some products under the best interest contract exemption, which requires brokers to sign a best interest contract with their client prior to any sales.

The DOL’s new proposal for annuities is similar to that provision, according to the regulator. If granted, the proposed rule would exempt certain insurance intermediaries, known as independent marketing organizations, to receive commissions on sales of fixed annuities to individual retirement accounts and plan fiduciaries.

The exemption would cover insurance intermediaries who have averaged a minimum of $1.5 billion in sales over each of the three prior years, a threshold the DOL says will ensure the firms have the financial stability and capacity to put in place policies preventing conflicts of interest.

In all, 22 firms have already applied for individual exemptions that would grant them “financial institution” status, and the DOL’s new proposal would grant a class exemption to help the regulator meet the demand. The regulator is seeking public comment on the proposal until February 19.


Last month, consulting firm Cerulli Associates released a report estimating that the fiduciary rule will cause at least a 10% decline in annuity sales through 2018. But Cerulli also says the rule may spur annuity product innovation.

Meanwhile, the future of the fiduciary rule, scheduled to go into effect in April, remains uncertain. President Donald Trump has never addressed the issue, nor has his nominee to lead the DOL, Andy Puzder. But Anthony Scaramucci, a member of Trump’s campaign team who’s been appointed as his general advisor, has called for the rule’s repeal, as have several GOP lawmakers. Some lobbyists expect Trump to immediately effect a six-month delay of the rules.

The rule also faces legal challenges from industry groups including those representing the insurance industry, although the DOL has scored three major victories against its opponents in the courts already.