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Compliance November 25, 2024
Nevada Joins NAIC Best Interest Annuity Rule, Making 48 States
Insurance industry groups are championing the move, because the state insurance regulations are one of the arguments against bringing retail annuity sales under ERISA.
Reported by Alex Ortolani
Nevada has become the 48th U.S. state to institute the best interest annuity rule administered by the National Association of Insurance Commissioners.
The Nevada Legislative Counsel Bureau’s legislative review committee on Monday approved the Nevada Division of Insurance’s rule based on the NAIC regulation, and it now applies to annuity sellers in Nevada, following similar moves this year by California, Indiana and Louisiana. Massachusetts and New York are the two states that have not implemented it.
The addition is a win for NAIC and the American Council of Life Insurers, who have been advocating for national uptake of the rule designed to ensure consumers get fair and accurate advice for an annuity sale.
The organizations have pointed to the best interest guidance when seeking court dismissals of the U.S. Department of Labor’s Retirement Security Rule. That rule, currently stayed by two federal courts, sought to bring annuity sales under the umbrella of fiduciary advice related to retirement savings, as regulated by the Employee Retirement Income Security Act.
The ACLI fought the retirement security rule, both in public commentary and in the courts. With President-elect Donald Trump set to return to power, analysts say it is likely the DOL will not appeal the stays. The first Trump administration declined to appeal in support of a prior fiduciary rule made under former President Barack Obama after it was tossed out by the U.S. 5th Circuit Court of Appeals.
The National Association of Insurance and Financial Advisors’ Nevada political action committee also championed Monday’s move, saying it would bring the best interest guidelines to consumers of annuities seeking to create a guaranteed income stream in retirement. It also highlighted its pushback against the DOL’s fiduciary rule in regulating annuities.
“These measures offer a better way to protect consumers than the harmful fiduciary-only approach adopted by the U.S. Department of Labor, which limits access to guidance and information about choices for retirement,” said ACLI President David Chavern and NAIFA Nevada Political Action Committee Chair Jarod Morgan in a joint statement.
The NAIC’s rules align with the Securities and Exchange Commission’s Best Interest Regulation, which is focused on the “quality and transparency” of retail investors’ work with advisers and broker/dealers.
Nevada signing on to the standard comes shortly after the Insured Retirement Institute issued joint comments with 10 financial trade associations regarding a draft of regulatory guidance to amend and clarify the NAIC’s best interest model. The trade organizations provided detailed comments on and suggestions for the draft guidance.
“We appreciate the Working Group’s efforts to provide greater clarity on the safe harbor provisions of the Model for state examiners, and our review of the Draft Guidance is focused on ensuring consistency with the Model,” they wrote. “It is important that any guidance fully conform to the Model without imposing any new or different requirements on the industry.”
