The word annuity on building blocks.
On Monday, New Jersey became the last state to adopt the National Association of Insurance Commissioners best interest annuity rule that applies to insurance agents and brokers selling individual annuity products
The rule does not apply to Registered Investment Advisors or advisors working within ERISA-covered 401(k) retirement plans when they’re giving fiduciary advice.
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This rule, which was approved today by the New Jersey Department of Banking & Insurance, requires insurance agents and companies to act in the best interests of consumers when recommending annuity products. The rule aligns with the SEC’s Regulation Best Interest to provide retirement savers with what supporters say are “robust safeguards” at the state and federal level.
This approval comes after industry trade associations stepped up lobbying efforts in 2024 in order to get the last nine states to adopt the rule.
The best-interest standard is strongly supported by a financial services industry wary of efforts to bring annuity sales under a fiduciary umbrella, which the Labor Department has attempted to do with its latest fiduciary rule. However, DOL's Retirement Security Rule, which was set to go into effect last September, has been beset by lawsuits and Congressional efforts, as well as a change in administration.
State insurance regulators also took the offensive against DOL’s fiduciary rule, issuing several comment letters defending state regulation of insurance and the need for annuities by many Americans nearing retirement.
Now, “all 50 states have now adopted a best interest standard for annuity sales—an important milestone for consumers,” said American Council of Life Insurers (ACLI) President and CEO David Chavern and National Association of Insurance and Financial Advisors (NAIFA) Trustee Dennis Cuccinelli. “This ensures people will get professional financial guidance they can trust on products that provides a reliable lifetime stream of income in retirement.”
Together, these models offer better protections for retirement savers than the Department of Labor’s fiduciary-only regulation that limited consumers’ access to retirement guidance and information, according to NAIFA.
Related: 401(k) lifetime income solutions: Is now the time for employers to offer new in-plan ‘annuity’ options?
Each year through 2027, more than 4.1 million Americans will turn 65. Most will not have a defined benefit pension that provides a regular monthly income in retirement.
Congress reaffirmed the importance of lifetime income when it passed legislation in 2019 and 2022 that made it easier for employers to include annuities in workplace retirement plans. With these enhanced state and federal consumer protections in place, millions of savers can be confident that financial professionals are offering guidance on annuities that are in the consumer’s best interest.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
