January 24, 2017

Brad Campbell Quoted in LifeHealthPro Regarding DOL’s Proposed Class Exemption for IMOs

Washington, D.C. partner Brad Campbell was quoted in a LifeHealthPro article titled, “IMOs to DOL: Fiduciary rule class exemption sets too high a bar.” On January 19, the DOL released its “Proposed Best Interest Contract Exemption for Insurance Intermediaries,” extending to qualifying independent marketing organizations (IMOs) a class exemption under the fiduciary rule from certain prohibited transactions of the Employee Retirement Security Act of 1974.

Many critics are concerned that the proposal establishes too high a threshold for most IMOs, requiring more than $1.5 billion in annual premium sales, significant insurance or capital reserves, and publicly-disclosed, audited financial statements. The proposals allows IMOs to receive compensation from sales of fixed indexed annuities. IMOs have 30 days to comment on the proposal. The new proposed exemption is intended to address criticism that the definition of a “financial institution” eligible to use the original Best Interest Contract Exemption left independent insurance agents with no financial institution allowing them to continue to sell fixed annuities.

Opponents of the overall fiduciary rule and its new exemptions have filed complaints in four court cases challenging the rule. Brad notes that new Trump administration officials may repeal or significantly modify the rule, making the exemption a non-issue.

“There’s a lot of uncertainty about the fate of the fiduciary rule, particularly in light of the change in administrations,” Brad said. “With President Trump taking office, the rule could be repealed, which would make the IMO class exemption a moot issue.”

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