Annuity Selection Safe Harbor Tacked Onto Retirement Bill

House Ways and Means Committee chairman Kevin Brady, R-Texas, submitted an amendment to the Family Savings Act—legislation included in a package of bills as part of Tax Reform 2.0.

The amendment is a fiduciary rule safe harbor for the selection of a lifetime income provider for retirement plans.

The amendment says a fiduciary should engage “in an objective, thorough, and analytical search for the purpose of identifying insurers from which to purchase such contracts, considering the financial capability of the insurer to satisfy its obligations under the guaranteed retirement income contract as well as the cost (including fees and commissions) of the guaranteed retirement income contract offered by the insurer in relation to the benefits and product features of the contract and administrative services to be provided under the contract.

Under the bill amendment, plan fiduciaries would be required to obtain written representations from guaranteed income providers that, among other things, they comply with state laws and regulations regarding insurers.

The amendment says there is no requirement to select the lowest-cost provider or contract. It also lays out requirements for period reviews of providers and products.

“A fiduciary which satisfies the requirements of this subsection shall not be liable following the distribution of any benefit, or the investment by or on behalf of a participant or beneficiary pursuant to the selected guaranteed retirement income contract, for any losses that may result to the participant or beneficiary due to an insurer’s inability to satisfy its financial obligations under the terms of such contract,” the amendment says.

A Government Accountability Office (GAO) report pointed out that the Department of Labor (DOL) has prescribed steps plan sponsors can take to satisfy their fiduciary duties when selecting an annuity provider for a 401(k) plan. However, according to industry stakeholders GAO interviewed, those steps are not often used because they include assessing “sufficient” information to “appropriately” conclude that the annuity provider will be financially able to pay future claims, without providing clear definitions for those terms.