Federal Roundup

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NAFA June Washington D.C. Conference a Success!
NAFA’s Annuity Leadership Forum was a big success, with over 100 folks attending the Washington, D.C. event. The conference featured excellent panel discussion, featuring Commissioner Voss, industry leaders and an IMO roundtable. Additionally, a big hit was the networking receptions that featured prominent congressional speakers, including Chairman Jeb Hensarling (R-TX) and Congressman Greg Meeks (D-NY). Lastly, a number of your industry colleagues conducted dozens of Hill meetings arranged by CapCity Advocates. These meetings provided an excellent opportunity to brand NAFA and industry with policymakers. Next March, NAFA plans a dedicated “D.C. Hill Walk Day”, so please stay tuned and plan to attend!

Final SWAPS Definition Rule Released: Annuities Exempt
Earlier this month, the SEC and CFTC adopted a final joint rule that further defined “swaps.” NAFA has been concerned primarily with one important aspect of the initial proposals, whether the rules would sweep in annuities and various other insurance products and subject these products to various onerous and unworkable requirements under the Act and any regulations. NAFA drafted and filed comments last July with CapCity’s assistance, strongly urging the fixed annuity products to be excluded from any relevant proposed definitions. The key point from NAFA’s perspective is the adopted “annuities,” including fixed annuities, will be specifically excluded from these definitions. These are NOT subject to the various requirements. The rules provide that the exclusion of annuities and other insurance products is deemed to be a non-exclusive safe harbor, meaning that even if a transaction doesn’t meet the enumerated product requirements, it still might be excluded on a case by case basis, depending on the facts and circumstances involved. Grandfathering is also provided for certain existing transactions that wouldn’t otherwise qualify for such an exclusion.

NAFA to Meet with Administration Officials on Longevity Annuity Proposed Rule
Last February, the Treasury Department issued a proposed rule that would modify the required minimum distribution rules to facilitate the purchase of deferred annuities that begin at an advanced age. These modifications would apply to certain contracts, termed “qualifying longevity annuity contracts” (QLACs), which meet specified requirements. Unfortunately, the proposed QLAC definition would exclude an “equity-indexed contract or similar contract.” No definition is given for equity-indexed contracts, but it might include any indexed annuity. NAFA filed a comment letter on May 3, expressing our concerns while also acknowledging our appreciation of the Administration’s recognition of the importance of annuities. Additionally, NAFA has arranged meetings with Administration officials, who are working on the QLAC rule to make sure our concerns are being heard. We believe it’s important to educate these officials about the benefits of FIA’s and to hopefully ensure that they qualify under the QLAC definition in the final rule.

DOL Proposed Fiduciary Rule
NAFA continues to monitor DOL’s efforts to publish a revised proposed fiduciary standard rule that would cover employer retirement plans and IRA’s. Timing is unclear, and given the delay, it’s possible the new rule might not be released until after the November election. NAFA will continue to seek a workable seller’s exception that would cover IRA’s and include fixed annuity products.

SEC Fiduciary Standards
NAFA continues to monitor any SEC actions to impose uniform fiduciary standards on broker-dealers and investment advisors. An SEC staff report last year recommended the creation of such a uniform standard, and we anticipate SEC will use the authority granted under Section 913 of the Dodd Frank Act to propose a rule, possibly for the next year. However, the SEC has received extensive political pressure to first conduct a cost benefit analysis before proposing any rule, and recently it released internal guidance that it will conduct such analysis for all proposed rules. There have been several SEC hearings in the past several months focusing on this topic. We have heard that later this year the SEC might publish a request for information.

Tax Reform
NAFA remains alert for any significant new proposals that would affect the taxation of fixed annuities or qualified or non-qualified account rules. Although there have been no such proposals this past month, it’s important for the industry to recognize that Congress is expected to undertake major tax reforms, possibly after the November election, but almost certainly in 2013, where “everything,” including annuity taxation, will “be on the table” and subject to change. In the months leading up to this debate, NAFA will continue educating Congress on the importance of maintaining the current favorable tax deferral provisions for insurance and annuity products.

Federal Insurance Office
The new Federal Insurance Office (FIO) created by the Dodd-Frank Act still has not released its overdue report on how the current system of insurance regulation might be modernized and improved. Once released, NAFA will review the report and respond as needed.

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