The Insured Retirement Institute (IRI) is once again carrying water for the annuity industry, this time urging the Department of Labor to retain a regulatory safe harbor that’s already obsolete. The safe harbor in question, rooted in the Pension Protection Act of 2006, was designed to give plan fiduciaries guidance in selecting annuity providers. But the DOL is correct in its proposal to eliminate it, because Congress already provided a more streamlined fiduciary safe harbor in the SECURE Act of 2019.
The DOL isn’t removing the protections for fiduciaries; it’s removing redundancy. And redundancy in regulation isn’t harmless, it’s confusing, it’s inefficient, and it creates traps for the unwary. Fiduciary law is complicated enough without giving plan sponsors two competing “paths” for compliance.
Annuities Don’t Belong in 401(k) Plans
IRI frames this as a fight over lifetime income options, but let’s be clear: the real issue is whether the annuity industry gets an easier time pushing its products into 401(k) plans. I’ve never been a fan of annuities in defined contribution plans. Why? Because they bring the same problems they’ve always had:
· High costs and opaque fees. Annuities often come loaded with surrender charges, hidden expenses, and compensation structures that enrich the insurer and the salesperson, not the participant.
· Complexity. 401(k)s are already complex enough without layering on an insurance contract that few participants will ever fully understand.
· Illiquidity. Plan participants expect flexibility from their 401(k) savings. Locking them into annuities undermines one of the key advantages of the DC system.
The idea of guaranteed income in retirement sounds great in theory. In practice, annuities inside 401(k)s create more fiduciary risk, not less. The “safety” that annuities promise is outweighed by the costs and risks of giving participants products that may not fit their needs.
Fiduciaries Don’t Need Two Safe Harbors
IRI argues that eliminating the regulatory safe harbor will disrupt fiduciary practices. That’s nonsense. Fiduciaries still have the statutory safe harbor from the SECURE Act, which is clearer and directly tied to ERISA. The DOL is doing plan sponsors a favor by streamlining the rules.
The annuity lobby’s real concern isn’t about fiduciaries—it’s about sales. The more annuities are framed as “safe” for plans, the easier it is for insurers to pressure sponsors into adding them. That’s not about retirement security; that’s about distribution channels and profit margins.
The Bottom Line
The DOL is right. Fiduciary rules should be streamlined, not cluttered with duplicative, outdated provisions. The retirement plan marketplace doesn’t need more excuses to wedge annuities into 401(k) plans. Participants are better served with transparency, diversification, and liquidity—things annuities rarely deliver. Plan sponsors should resist the pressure. Just because the annuity industry wants a broader playground doesn’t mean you have to give them access to your participants’ retirement savings.
