The SEC is working on rules for a variable annuity summary prospectus and has had success developing a similar summary for the mutual fund industry. These efforts are a step in the right direction. I hope regulators across the country will lend their support.
- Create consistency in disclosure and sales practices across all states.
Life insurance and annuity products work the same for consumers regardless of where they live. A consumer who purchases a life or annuity product in one state should receive the same disclosures and product information as those who purchase the same product in another state.
The Interstate Insurance Product Regulation Commission has an opportunity to continue its strong leadership in driving comprehensive and consistent product standards by expanding its mission to cover product disclosure, contract consistency and sales practices. This uniformity will make it easier for companies to introduce new products by removing the cost and time associated with tailoring practices for the regulatory requirements of many states.
- Foster portability of 401(k) income-guarantee products.
While fewer employers may be offering traditional pension plans, a growing number are trying to help their employees turn their 401(k) investments into guaranteed retirement income. Such 401(k) income-guarantee products are likely to become more popular as this trend gains traction. It’s critical to create rules to facilitate portability of 401(k) income-guarantee products when employees change jobs, because today’s career path commonly involves multiple stops before retirement.
To do this, consistency must exist in the way we create these income guarantees, including a common system for placing a net present cash value on the guarantee. The value of the guarantee could be used to purchase a guarantee with a new employer plan or in an IRA investment.
Understandably, most of today’s industry and regulatory dialogue focuses on the needs of consumers. However, we all must begin plotting a path to address the needs of consumers 10 or 20 years down the road. That’s when our nation will face the brunt of the expected retirement-income crisis. We have a great opportunity to work together to ensure tomorrow’s retirees have the innovative tools they will need to achieve retirement-income security.
Eric Henderson, FSA, MAAA is senior vice president of life insurance and annuities for Nationwide Financial