IRI Pushes Back on DOL’s Annuity Safe Harbor Deregulatory Stance

The Insured Retirement Institute wrote to the Department of Labor on Thursday, urging the agency to reconsider its decision to rescind a regulatory safe harbor for the selection of annuity providers in retirement plans.

In the letter, the IRI stated that rescinding the rule would “unintentionally lead to reluctance in offering lifetime income options, which would be contrary to the goals of the SECURE Act and SECURE 2.0 in promoting guaranteed retirement income.”

The DOL established a regulatory safe harbor under the Pension Protection Act of 2006 to guide fiduciaries in selecting annuity providers and contracts for defined contribution plans. This framework outlined key considerations fiduciaries should evaluate during the selection process. In 2019, the Setting Every Community Up for Retirement Enhancement Act introduced a complementary statutory safe harbor under the Employee Retirement Income Security Act Section 404(e), focused specifically on assessing the financial strength of insurers—a requirement originally embedded in the 2008 regulatory guidance on the Pension Protection Act’s provisions.

The dual protections were designed to work in tandem, offering fiduciaries a “belt and suspenders” strategy: the option to comply with both safe harbors to reinforce prudence and limit liability. As Groom Law Group explained, fiduciaries currently may choose either path when selecting annuity providers for benefit distributions.

However, in July, the DOL proposed repealing the regulatory safe harbor from the 2006 act, calling it redundant and unnecessary in light of the newer statutory provisions. The agency framed the repeal as part of a broader effort to streamline federal regulations and “improve the daily lives of the American people.” Unless significant opposition was submitted by July 31, the date on which IRI submitted its letter, the repeal will take effect on September 2.

The IRI argued that by maintaining both safe harbors, fiduciaries could follow either the statutory or regulatory compliance, allowing sponsors to select the standards best suited to their offerings.

“Retaining the regulation’s safe harbor will help ensure that fiduciaries have access to well-understood and time-tested guidance,” wrote Emily Micale, the IRI’s director of regulatory affairs. “Many plan sponsors and service providers have developed internal procedures, oversight processes, and fiduciary practices based on the safe harbor framework established by the Regulation. These standards continue to provide value by reinforcing prudent selection criteria, promoting consistent practices, and reducing ambiguity in the application of ERISA’s fiduciary duties.”

According to Tamiko Toland, a retirement annuity consultant, if the DOL decides to go through with rescinding its guidance, it should not slow adoption of annuities in retirement plans, because the safe harbor provided under the SECURE Act would remain.

“What fiduciaries are looking for is more guidance. It’s good to have to reduce confusion over a standard,” she says. “But what they really are looking for is more guidance. This doesn’t seem disruptive, because it doesn’t get rid of the SECURE safe harbor, but there’s still a strong demand for more clarity.”

Kevin Crain, executive director of the Institutional Retirement Income Council, agrees that the DOL’s decision to rescind the PPA-related guidance should not have a negative effect on adoption of annuities in retirement plans, since the safe harbor provided in the SECURE Act remains.

“The DOL was supportive of the SECURE Act statutory safe harbor, with this action,” he says.

However, the IRI’s letter stressed that the DOL’s guidance and the SECURE Act provided different paths to the safe harbor, each providing a vital source of security for the retirement community.

“Given the meaningful distinctions between the two safe harbors and the important role that the regulation continues to play in fiduciary guidance, we respectfully recommend that the Department retain the Regulation in the Code of Federal Regulations,” the IRI letter stated.