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In June, NAFA joined with the Coalition for Annuity Awareness and celebrated the inaugural June National Annuity Awareness Month with many educational webinars; publications about annuities; and informational blogs, articles and tweets promoting annuities to the general public. We topped off the month with a National Fly-in for Fixed Annuities and sent many NAFA members to the Hill to talk to their representatives about the issues we are concerned about and the actions we would like these representatives to support. Here is what we shared.

Concerns with the Camp Draft Tax Proposal

New Taxes on Insurance Companies – New taxes on insurance carriers will unquestionably affect product affordability and choice.

Changes to Annuity Tax Deferral and Roth-Only IRAs – The proposals to reduce pretax contributions by 50 percent and add surtaxes for certain savings plans will severely limit Americans’ ability to accumulate retirement savings.

The impact that tax deferral has on the interest accumulation in an annuity is powerful and fuels growth—especially in today’s interest climate. Forcing retirement savers to pay taxes on their savings today will significantly reduce the payment amount, and that will impact the growth potential of the savings.

In addition, Roth IRA contributions are not tax deductible, and tax deduction is a strong incentive to save; removing the incentive will fundamentally change the behavior of those planning and saving for retirement. Roth IRAs can be a valuable financial planning and retirement income tool, but they don’t make sense for everyone or every situation.

Elimination of Stretch IRAs – Stretch IRAs are named as they are because of their effective, multi-generation planning capabilities. Eliminating them undercuts family retirement planning security and small-business succession planning. The ability of individuals and families to responsibly plan for their retirement, while having the choice of extending their savings to provide financial security for their dependents, is a worthy policy goal and one that should be encouraged.

Fiduciary Duty Concerns

  • Neither the DOL nor the SEC has proven that consumers will be better served with a single, one-size-fits-all standard.
  • Neither the DOL nor the SEC has proven that their rhetoric about the fiduciary standard is true or that it offers more consumer protection than the suitability standard.
  • Complaint data demonstrates that fixed-annuity owners are happy with their annuities and with being protected by watchful and empowered state insurance regulators.
  • Requiring a fiduciary-only standard unintentionally discriminates against minorities, because a disproportionate percentage does not have sufficient assets to be accepted as clients by fee-based fiduciary advisors.

The Department of Labor (DOL) should not revise current ERISA definitions to make the payment of commissions on IRAs, a prohibited transaction, because this would cause undue hardship on over 88 million households. Because the median value of an IRA account is $34,000 and the median value of a 401(k) plan account is $30,000, a fiduciary-only standard for qualified accounts would effectively deny the vast majority of Americans access to professional financial advice.1 People should not be deterred by zealous regulation from converting at-risk 401(k) money to fixed annuities with the security they afford.

Thirty-four jurisdictions (33 states and Washington D.C.) have adopted the NAIC Suitability Standard and in many more states adoption is pending. Recommending a suitable sale will still be required for every fixed annuity whether the DOL or SEC impose their fiduciary standard or not.

Therefore, an additional fiduciary standard is:

  • Duplicative and inappropriate for fixed annuity sales, and
  • Will harm consumers by making annuities less attractive and harder to purchase.

What We Are Asking of Congress

  • Preserve current tax laws that encourage individuals and businesses to affordably plan for retirement and manage risk.
  • Carefully consider the negative effect on society if changes to public policy make it harder and more expensive to achieve this security.
  • Make certain that the DOL is not allowed to apply a fiduciary standard on fixed annuities and particularly fixed annuities purchased in IRAs.
  • Although time doesn’t permit us to go into all our specific recommendations and supporting data, please use us as a resource to ensure that SEC and DOL efforts do not change investment and insurance advisory services in ways that will harm annuity product choices and affordability.

Recently, we have seen many of the federal issues mentioned above move off the front page because both Congress and federal regulators have sent signals or issued reports that they will not be taking any specific action this year. However, this does not mean that behind-the-scenes activities have stopped. Our products and product offerings continue to be scrutinized and in many cases misinterpreted by those with political agendas or those engaged in election-year posturing. Although the extra time we have to push for our desired outcomes may be reassuring, we must not let up or assume that our products and those who distribute and sell them won’t continue to be under scrutiny, and in some cases attacks, by those working behind the scenes in Washington.

In addition to our advocacy work promoting healthy regulation and oversight, NAFA is engaged in positive and proactive messaging to consumers and policymakers. Because fixed annuities also continue to be vilified by those selling competing products (and who are subject to less restrictive and regulated marketing and sales practices), NAFA has developed “Why We Love Annuities,” a one-page piece promoting the positive features of fixed annuities and our industry. The publication is available to NAFA members to share with the public or others in the industry. NAFA is also actively engaged with and recently completed a 30-second advertisement and media buy on CNN, FOX and MSNBC to highlight our industry and our products. You can view the ad at the SecureFamily website above. And finally but importantly, NAFA helps support, both financially and with annuity content and expertise, SAFE, the Society for Annuity Facts & Education, which just recently received approval for its 501(c)(3) status as an educational society promoting annuities. NAFA initiated the development of the Coalition for Annuity Awareness, a group of trade associations and companies that support annuities. The Coalition will spend the rest of this year and up to June 2015 in a grassroots effort to obtain proclamations from state governors proclaiming June as National Annuity Awareness Month. The Coalition is also searching for a representative to sponsor a Congressional resolution declaring June as National Annuity Awareness Month.

NAFA continues to make a bigger and bigger footprint on the annuity landscape, and we are forever grateful to our Board of Directors and members who make it possible. So, stay engaged, active and tuned in to add your support and energy promoting the awareness and understanding of fixed annuities.

U.S. Census Bureau, Survey of Income and Program Participation, 2011.

Kim O’Brien is NAFA President & CEO. NAFA membership represents over 85% of all premium for fixed indexed, declared rate and income annuities written through the independent distribution system. Kim has over 30 years of experience in the insurance industry beginning as in 1981 as office manager for an insurance agency. In 2002 Kim developed and ran her own marketing organization and received the 2002 Entrepreneur Award from Sun Life. In between, Kim worked as a marketing executive for major insurance companies and was responsible for their annuity and term life insurance product line development, marketing, and training processes. In 1993, Kim served as interim deputy director of the Wisconsin Department of Insurance under Governor Tommy Thomson and served Governor Thompson until a permanent replacement could be found. In July 1992, Kim was the first women in Wisconsin to pass the CFP exam established in 1991 by the CFP Board as a single comprehensive examination modeled after the licensing examinations given to attorneys or Certified Public Accountants (CPAs). Kim O'Brien received her BA from Ripon College, her MFA from the University of Northern Colorado, and an MBA with an emphasis in Economics from Edgewood College, Madison, Wisconsin. In 2008, Kim was accepted into the Juris Doctorate program at the William H. Taft Law School and completed her first year and passed the preliminary California Bar as required before continuing her degree. She has recently re-instituted her studies to begin this summer after a hiatus due to her NAFA workload. As an avid musical theater fan and dancer, Kim has directed or choreographed over 60 shows in Milwaukee and Madison, Wisconsin. She lives with her husband and college sweetheart of 39 years, Kelly, in Phoenix nestled in the Thunderbird Conservatory she enjoys hiking the mountains with their Irish setters.

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