An insurance licensing clearinghouse for agents operating in multiple states has never been closer, and a new final rule from the Treasury Department creating the availability of longevity annuities in workplace plans and IRAs are among the headlines from this week’s Insured Retirement Institute (IRI) Government, Legal and Regulatory Conference in Washington, D.C.
The IRI told conference attendees June 30 that one of the organization’s top legislative priorities, securing passage of the National Association of Registered Agents and Brokers Act (NARAB II), now appears to be on the horizon. NARAB II would establish the long-sought-after insurance licensing clearinghouse.
“With recent legislative victories in hand, it’s clear that there is unprecedented momentum and support for moving NARAB II forward this year,” IRI Senior Vice President and General Counsel Lee Covington said during the conference. “We will continue to work with congressional leaders to find the right legislative vehicle to get it across the finish line and off to the White House for President Obama’s signature.”
The Senate passed NARAB II legislation, as part of a flood insurance bill, in late January. But while the House had already passed standalone NARAB II legislation in September of 2013, it passed its own version of the flood bill without NARAB II. The next opportunity for NARAB II passage may be to include it in legislation to extend the terrorism risk insurance program, which will expire at year’s end without reauthorization. The House Financial Services Committees recently added NARAB II to its reauthorization bill (H.R. 4871).
“Whether it’s through this legislation, or another vehicle, we will continue to pursue legislation to establish efficient and cost-effective insurance licensing for those operating in multiple states,” Covington said. “IRI’s research continues to show that the current process is burdensome and may be impeding broader utilization of lifetime income products.”
Maintaining state insurance licenses across multiple jurisdictions is a regulatory obstacle that may impede broker-dealers’ ability and financial advisors’ willingness to sell annuity products. Adding to that, previously unreleased data from an investor survey conducted by IRI earlier this year found that 43% of investors are considering relocating to another state for retirement. A separate IRI survey of Baby Boomers found that three in four would want to keep working with their financial planner if they relocated to another state. “NARAB II would ensure that these clients could continue to work with their financial professionals and still have access to a full suite of lifetime income strategies, without forcing the advisor to overcome the burden of redundant insurance licensing requirements,” Covington said.
Longevity annuities OK’d for qualified plans
On July 1 at the IRI conference, the Treasury Department announced a final rule for qualifying longevity annuity contracts (QLAC) that facilitates access to deferred annuity options in qualified retirement plans including IRAs.
With these longevity annuity contracts, the income stream commences at an advanced age, such as 80 or 85. As such, the use of these options in qualified retirement plans are typically impeded by required minimum distribution rules that kick in at age 70.5. Under the QLAC rule, the value of the annuity contract would be excluded from the account balance used to determine required minimum distributions.
IRI President and CEO Cathy Weatherford said the rule marks a major milestone for making lifetime income more readily available to American workers and their families.
“The availability of longevity annuities in workplace plans and IRAs will facilitate access to a steady stream of guaranteed income throughout a retiree’s later years and help Americans enhance their retirement security at a time when they are most vulnerable to outliving their financial assets or facing reduced standards of living,” Weatherford said.
Click here to read the Treasury Department’s announcement
Editor’s note: The IRI contributed to this article
About the IRI: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.