Carrier stability still the fly in the annuity ointment

The Labor Department will host a public hearing in the next few months to discuss concerns about including annuities in retirement plans. But addressing plan sponsors' concerns about carrier stability continues to bedevil the regulator. “There are so many interesting and innovative developments in the marketplace, but the question of how to better assure the solvency of the insurers themselves is a tough one,” said Phyllis C. Borzi, assistant secretary of labor with the Employee Benefits Security Administration. Indeed, insurer solvency is an issue that was brought up in a number of the 800 comment letters the Labor and Treasury departments received recently. Those comments came in response to the departments' request for information on providing lifetime-income products in employer-sponsored retirement plans. One of the concerns of plan sponsors is an insurers' ability to make good on the guarantees attached to retirement plans. That worry, as well as plan sponsors' concerns about liability and safe harbor for selecting annuity providers, has limited the uptake of the products among plans. “Some [comments] suggested that it's possible we can some how figure out whether there is a better way to assess risk in insurance companies,” Ms. Borzi said. “There were people who said maybe we should think of a reinsurance product.” The DOL hopes to address the issue either in a public hearing or in additional technical meetings. The regulator also expects to host a public hearing with the Treasury before September to discuss some of the financial and educational disclosure questions the DOL has been encountering, Ms. Borzi said. Sen. Herb Kohl, D-Wis., chairman of the Special Committee on Aging, yesterday sent a letter to the U.S. Government Accountability Office, asking them to review the types of state guaranty funds available for annuity holders, as well as the current regulatory structures that ensure that carriers can meet their guarantees.