The Department of Labor Fiduciary Rule Recent Business Decisions and Other DevelopmentsSince our last update, leaders from Columbus Life and the Western & Southern Financial Group have been actively reviewing the Department of Labor’s Fiduciary Rule. A significant number of resources have been and will continue to be focused on our collective response so that you-our valued producers-can continue to thrive in this new environment.
With that in mind, below you’ll find an update on the key decisions we have reached, the issues we continue to work on, and what you can expect from us moving forward.
We Continue to Prepare for April 10 While some companies have announced changes, others are still evaluating the Rule’s impact on their business. However, most of the industry is moving forward with planning and preparation, even with the results from our recent presidential election. Uncertainty remains regarding the impact-if any-that the new president’s administration will have on the Rule. Given the current circumstances, we believe the only responsible course of action at this time is to continue preparing for the April 10 deadline, while closely monitoring developments for future changes.
Current Business Practices Will Change The Rule expands the definition of a “fiduciary” to include anyone who provides retirement investment advice-especially when it comes to products that have an investment component. Products with an investment component include fixed, variable and indexed annuities, and whole and universal life insurance. In other words, if you recommend and sell products like those mentioned above-either in a qualified account or funded with distributions from a qualified account-you will be considered a fiduciary under the Rule. Qualified accounts include 401(k)s, 403(b)s, IRAs and similar accounts.
If you are a fiduciary, you cannot receive compensation that varies based on your recommendation, such as a commission, unless you meet the requirements of an exemption. Two exemptions are available for insurance and annuity products:
* Prohibited Transaction Exemption (PTE) 84-24 for life insurance and fixed annuities.
* Best Interest Contract Exemption (BICE) for variable and fixed indexed annuities.
Under both exemptions, you must follow an Impartial Conduct/Best Interest Standard, and you must follow specific procedures and provide disclosures to your clients. We are actively working on the appropriate forms and processes for you to accurately submit your business to us after the April 10 deadline.
Pending Decisions and Work in Progress There are some important issues that we have not yet resolved, but that we will continue to research and make decisions about over the next few months.
Product Changes: Fixed indexed annuities will be considerably impacted by the Rule, and many producers and firms are faced with the decision to either apply to be or align with an eligible financial institution to keep offering these valuable products in the qualified space. We are evaluating our options to continue offering a fixed indexed annuity with the same benefits we do today, and will share information with you as a decision is made.
Compensation:The Rule requires “reasonable” fees and compensation, but a specified range was not defined by the DOL. We believe the level of “reasonable compensation” will be determined by the overall marketplace, and are now working on a practical, yet competitive structure that ensures our producers will be rewarded for their business.
Incentives and Benefits: We will continue offering world-class conferences and sales awards to reward you and your colleagues for your relationship with Columbus Life. Conference qualifications are now being finalized that will both meet the Rule’s requirements and provide attractive qualification opportunities for as many of our producers as possible. We will announce these qualifications by year-end.
This update marks the start of our regular updates to you about the DOL Fiduciary Rule. Ultimately, we want to make sure you’re well-informed about how the Rule will affect you, how to do business with your clients, and how to continue doing business with us. Over the next few months, we’ll share even more decisions with you, along with new resources and tools to help you comply with the Rule, and even find new business opportunities. We value your trust in us, and thank you for your business both now and in the future.