The IRI said that the regulatory safe harbor, established under the Pension Protection Act of 2006, provides fiduciaries with a clear and comprehensive standard for selecting both annuity providers and contracts. The safe harbor, enacted under SECURE 2.0, primarily addresses the financial viability of insurers, while the regulatory safe harbor encompasses broader fiduciary duties regarding both the provider and the annuity contract itself.
The DOL considered these two safe harbors redundant. However, “retaining the Regulation’s safe harbor will help ensure that fiduciaries have access to well-understood and time-tested guidance,” wrote Emily Micale, Director, Regulatory Affairs at IRI.
“Many plan sponsors and service providers have developed internal procedures, oversight processes, and fiduciary practices based on the safe harbor framework established by the Regulation. These standards continue to provide value by reinforcing prudent selection criteria, promoting consistent practices, and reducing ambiguity in the application of ERISA’s fiduciary duties.”
The IRI, which represents asset managers, broker-dealers, and distributors who delivering retirement income to millions of American workers and retirees, also said that maintaining both safe harbors affords fiduciaries flexibility to choose the compliance pathway best suited to their plan design, participant demographics, and product offerings.
In addition, the IRI noted that some fiduciaries may find greater comfort and confidence following their established fiduciary processes under the regulatory safe harbor when making lifetime income options available to their participants.
“IRI strongly supports efforts to ensure that regulatory standards are clear, consistent, and supportive of retirement income security,” said Micale. “Retaining the Regulation’s safe harbor would serve these goals and avoid unnecessary disruption to fiduciary practices that are currently working effectively.”
The ERISA Advisory Council, a 15-member council that provides advice on policies and regulations affecting employee benefit plans, has also urged the DOL to safeguard lifetime income options in 401(k) plans. In June, the EAC sent a letter to the DOL recommending that the agency create either regulatory or sub-regulatory guidance or a “tips sheet” which would “serve as a roadmap” for fiduciaries considering lifetime income options.
This regulation “could facilitate greater plan adoption” for lifetime income QDIA options, such as an annuity,” according to the council. The document would focus on how to create a prudent process for selecting a lifetime income qualified default investment alternatives option.
At a hearing in 2024, litigation risk was described by several members as a leading factor reducing the use of lifetime income options in QDIAs. This tip sheet is designed to provide guidance that could ease that anxiety for employers.