On December 17, the SEC approved a rule that would define indexed annuities as securities if the amounts payable under the contract are more likely than not to exceed the amounts guaranteed under the contract. The new rule would not require registration of annuities with the SEC, leaving the product regulation to state insurance commissioners. But by defining the products as securities, they will be subject to securities sales practices oversight. The Commission voted 4-1 to approve the rule, with Commissioner Paredes dissenting, after receiving hundreds of comments, including dozens of letters from FPA members. The new rule, which is intended to combat abusive sales practices and unsuitable recommendations, will apply to indexed annuities issued on or after Jan. 12, 2011.
Financial Services Chair Signals Reform Agenda
Speaking before a consumer advocate conference, chair of the House Financial Services Committee, Barney Frank (D-Massachusetts), said that he planned to introduce legislation that requiring lenders that securitize and sell mortgages to have an interest in the underlying mortgages. Executive pay will also be in focus, including allowing shareholders to have a non-binding vote on executive pay packages. Regulation of hedge funds is likely to be an issue, reviving legislation originally proposed by Chairman Frank in 2006. The Financial Services Committee will be looking at broad regulatory reform, including the US Treasury’s “blueprint.” Chairman Frank indicated systemic risk protection and investor protection should be separated in order to better protect consumers, according to reports.
What’s in store for 401(k) plans in 2009
The IRS Office of Employee Plans expects to issue final funding rules for single-employer and multiemployer pensions in 2009. Employee Plans will also undertake an extensive data analysis of 401(k) administration, an area suspected to have large compliance issues. The IRS hopes that the data will help plan administrators self-correct problem areas. However, Congress could take legislative action as it searches for money to offset other legislative priorities as required by pay-as-you-go rules. Congress will likely seek to expand the number of participants in retirement plans and both the Senate and the House have expressed interest in automatic IRAs. As many plan participants have seen their account balances decimated this year, Congress may attempt to provide some level of income guarantee, perhaps through a mandatory annuitization of part of the account balance. This will not be a primary focus for Congress in 2009 and final legislation may get pushed to next year.
