The DOL asked for public comments on lifetime income solutions in 2010 to update its 2008 safe harbor rule. Some sponsors that offer in-plan retirement income products view this rule as providing sufficient protection, but most disagree.
"Many employers and their professional advisers are not comfortable relying on the (2008) safe harbor," the Treasury Department report said. Terms describing fiduciary duties "are not defined," and the rule requires sponsors to "reach conclusions about the solvency of an annuity provider years or decades into the future."
ERISA attorney Bradford Campbell conceded the 2008 regulation didn't work as hoped.
"Most people viewed it as a recitation of prudence — not an objective checklist," said Mr. Campbell, Washington-based counsel for Drinker, Biddle & Reath LLP and a former assistant secretary of labor for the Employee Benefits Security Administration during the George W. Bush administration.
Mr. Campbell said the DOL, rather than the Treasury, would be the best agency to develop a new safe harbor rule to "protect participants, cut off frivolous lawsuits and encourage more innovative products."
However, he wondered how fast the Labor Department could act because "so few political decision-makers in the Trump administration have been put in place." Most notably, Mr. Campbell's old job has been vacant since Phyllis Borzi left in January at the end of the Obama administration.
Last month, President Donald Trump nominated Preston Rutledge — who has been tax and benefits counsel for the Senate Finance Committee since 2011 — as his EBSA chief. The Senate Health, Education Labor & Pensions Committee will hold a hearing on the nomination Nov. 15.
The Labor Department announced in 2014 that it was working on safe harbor rules, according to the Treasury Department report, but "the DOL has not issued any proposals to replace or amend the safe harbor." Mike Trupo, a Labor Department spokesman, declined to comment. Ms. Borzi could not be reached for comment.
"I don't know why there was no traction on this," said Robert Austin, the Charlotte, N.C.-based director of research for Alight Solutions, referring to the absence of a broader safe harbor.
He speculated the DOL devoted so much time on developing the fiduciary rule and other matters such as fee transparency that time ran out on the Obama administration before the department could propose rules. Other experts interviewed by P&I shared that view.
In recent years, regulators have acted to ease participant and sponsor concerns about in-plan annuities.
For example, the IRS said in October 2014 that target-date funds containing deferred annuities won't violate rules against DC plans discriminating in favor of higher paid employees, as long as other IRS guidelines are followed.