Tools you need to become a politically
active and involved advisor.
Become an informal advisor to your
representatives on industry matters.
Support candidates for state and
federal office who understand the
value advisors and agents play in
securing America's financial future.
Information on Warchest
Advisor Today has the largest circulation among
insurance and financial planning advising magazines.
117th Lame Duck Congress Tackles Packed Agenda
Before the lame duck 117th Congress fades into history later this month, it is facing a packed agenda that has less than good odds for a successful resolution. But there are some issues— e.g., the bipartisan, bicameral SECURE 2.0 retirement savings bill——that may find their way to enactment.
There are only two pieces of legislation that the outgoing Congress considers “musts.” These are the bill to fund the government past December 16, when current funding authority expires; and a defense authorization bill (the NDAA). There are, however, a slew of other bills that could pass, or could be added to the year-end government funding bill.
Among the not-quite “must” but heavily-lobbied and mostly bipartisan bills that the 117th Congress may enact is the retirement savings package known as SECURE 2.0. Negotiators from both parties in both chambers say a bicameral, bipartisan and widely-supported retirement savings bill will be ready to add to the year-end government funding bill, if and when it is ready for consideration by the full House and Senate.
SECURE 2.0 contains dozens of provisions that are helpful to incentivizing more retirement savings. Among them are a new “safe harbor” retirement savings plan design, an increase in the age at which required minimum distributions are mandated, provisions that would allow access to retirement savings in cases of emergency, and rules making it easier for plan participants to annuitize some of their retirement savings funds. There are still unresolved issues—e.g., whether to make the SAVER’s credit refundable, whether to include a required automatic enrollment rule for new plans, whether to allow collective investment trusts and separate insurance company accounts as investment options in 403(b) plans, and whether to allow required notices and disclosures to be made electronically unless a plan participant demands their notices and disclosures on paper. But Hill negotiators say these issues will be resolved, and in a timely manner. However, they won’t at this point say how they will resolve these issues.
Prospects: Prospects for the SECURE 2.0 legislation are good if Congress can agree on a fiscal year (FY) 2023 policy and funding level-changing appropriations package. If, however, agreement on an FY 23 omnibus funding bill proves impossible, the 117th Congress will probably pass a “clean” (or almost clean) continuing resolution (CR)—i.e., one that excludes most if not all new policy. A clean CR significantly lessens the odds of enacting SECURE 2.0.
Whether this lame duck Congress can agree on a bill that will include new policy and new funding for FY 23 is an open question. Key lawmakers—including those in the leadership from both parties—set the odds at about eve. But time is short, and the issues are many, and thorny, so one thing is near-certain—this lame duck Congress will work deep into December—probably passing a short-term extension of the current CR that expires on December 16—before the issues are resolved.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
Divided Government Awaits in 2023
While it was expected that the Republicans would take control of the House of Representatives after the November 8 mid-term elections, it was unexpected to the point of shocking that they would do so with such a narrow margin. The Senate will remain under Democrats’ control in the 118th Congress. And, of course, President Biden remains in the White House. This means a divided government for the next two years. Most Congress watchers think this also means significant difficulty for enacting any legislation in 2023-2024.
The Senate: The 118th Congress’ Senate will have 47 Democrats, three Independents (two of whom caucus with the Democrats), and 49 Republicans in it. The 51st Democratic vote—if it happens—will come from Sen. Kyrsten Sinema (I-AZ), who announced on December 9 that she was leaving the Democratic party and has registered as an Independent.
Sen. Sinema’s decision sent shock waves through Washington, although it is possible it will change almost nothing. Sen. Sinema said she will not caucus with either the Democrats or the Republicans—but Hill insiders point out that she rarely attended Democratic Caucus meetings, anyway. She also said she intends to vote as she always has--and she almost always voted with the Democrats. She says she will not seek to change Senate organizing processes. Sen. Chuck Schumer (D-NY), the Senate’s Majority Leader, has confirmed that she will keep her committee assignments.
Her decision to leave the Democratic party could help her should she decide to run for reelection in 2024. She expected to face a primary challenge from the left, and her switch to Independent will eliminate that threat. However, it could set up a three-person race in Arizona—a Republican candidate, Sinema, and a Democratic candidate. A three-way race could favor the GOP candidate. So, her decision to run—if she makes it—as an Independent may or may not help her reelection chances.
Sen. Sinema has been business-friendly during her Senate tenure to date. She early on declared her opposition to Democrats’ proposal to raise corporate tax rates, and she was the crucial 50th vote on that issue in 2022. She is likely to continue to resist tax rate increases, even as Senate Democrats are likely to continue to propose rate hikes, at least on the rich and on big corporations.
The current partisan make-up of the 118th Congress’ Senate came clear not only after Sen. Sinema’s party-switch, but also after Georgia’s voters in the December 6 run-off election gave the win to incumbent Sen. Raphael Warnock (D). All of the Democrats’ vulnerable incumbent Senators won reelection, and the Democrats flipped Pennsylvania’s Senate seat to Democratic control, when Sen.-elect John Fetterman (D) won the race to replace retiring Sen. Pat Toomey (R-PA).
That one-seat difference is important. With an absolute majority—even though it’s just one seat—Democrats can exert absolute control over agendas. They will get a majority on each committee, and also the lion’s share of resources. It’s a key advantage.
The House: In the House, the current partisan split is 222 Republicans to 212 Democrats—there is one open seat, due to the post-election death of Virginia Democrat Rep. Donald McEachin. That means Republicans can lose only four votes and still pass partisan legislation.
That narrow majority was exactly the situation faced by Democrats for most of 2021-2022, but the GOP Conference in the House appears to be, both historically and looking forward to the new members coming in January, considerably less likely to compromise enough to achieve the kind of unity that a four-vote margin will require. However, keep in mind that predictions of inability to compromise haunted the narrow margins held by the Democrats in the 117th Congress, too. And look at the long list of new laws enacted in the 117th Congress. The GOP-led House could surprise the so-called experts in Washington, DC, and deliver unified (or near-unified) support for Republican priorities in the two years to come. That could mean House passage of Republican bills, but those bills will still face a Democratic Senate and White House.
All of these factors will come into play as Congress considers legislation important to insurance and financial planning issues. So, too, will the positions/votes of the more than 70 new members of the House—37 Republicans and 35 Democrats—coming from 32 different states. These new members could prove crucial in figuring out the degree to which party loyalty, constituent representation, and/or policy position determines their votes.
The Issues: It is still too soon to tell with certainty what policy issues the 118th Congress will take up. But some possibilities that would impact insurance and financial planning are whether to make permanent the tax cuts enacted in 2017, the potential for investment rules surrounding cryptocurrency, legislation to address financial data privacy, an effort to enact a federal paid leave policy, initiatives to make long-term care insurance more affordable, and new tax rules to benefit business, especially small businesses. And, Senate Banking Committee chairman Sen. Sherrod Brown (D-OH) has already announced his intention to move legislation to reform the National Flood Insurance Program (NFIP). And the GOP in control in the House will make it harder for Congress to work on such issues as worker classification/independent contractor status.
Prospects: Unlike in the 117th Congress, GOP priority legislation, if it can get through the House, will run smack into a Senate still held by Democrats—not to mention a Democratic President. Some say the situation boosts the odds of compromise on more centrist positions. But more observers predict gridlock on all but the most must-pass bills (like, for example, funding the government)—and on those, the debates will be fierce and the battles intense.
In short, the odds currently suggest that absent some sort of crisis, gridlock will prevail, with a lot of House activity focused on investigations and on positioning for the 2024 presidential and Congressional elections. There will be a lot of hot political air, but chances are not a lot of actual activity or results. But the 118th Congress will enact some legislation—lawmakers always do. NAIFA will be in the thick of things advocating for new rules (and stopping adverse proposals) that make it easier for Main Street Americans to plan for their financial security.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
118th Congressional Leadership Mostly Set, But Important Openings Remain
The House and Senate have in some cases chosen their 2023-2024 leadership, but not all key positions have yet been filled. Among those still open are Speaker of the House and chairs of the House Ways & Means and Education & Labor (likely to be renamed Labor & the Workforce) Committees. Here’s the current rundown:
Speaker of the House: The front runner—and most say likely—Speaker of the House in 2023-2024 is Rep. Kevin McCarthy (R-CA), the current House Republican Leader. He does not yet have the 218 votes he needs to be elected Speaker, and there’s a small (but big enough to block him) number of Republican House members who are actively opposing him and working to deny him the Speakership.
Part of Rep. McCarthy’s problem is the narrow margin by which the GOP will control the House. With only 222 House Republicans, if just five vote against him (and all other members are present and voting), he won’t win. So far, four House Republicans have announced publicly that they oppose McCarthy’s speakership bid, and a number of others won’t say they support him. However, the only other announced candidate for the job—Rep. Andy Biggs (R-AZ)—is a hard-right ultra-conservative who himself has not (and some say cannot) mustered the votes needed to win the top job in the House.
The situation could get messy. Without an electable alternative available to House Republicans, Democrats may find themselves in a position to influence the outcome. There’s talk of a Republican-Democrat coalition aimed at electing a more centrist Speaker. There’s talk of multiple ballots and of back-room deal-making. With less than a month to go before the January 3 vote on the new speaker, the talk will get crazier, the deal-making more intense. But most Washington observers—on and off the Hill—believe in the end Rep. McCarthy will be elected Speaker of the House. However, whether a Speaker McCarthy can unify House Republicans enough to enact legislation is the question of the day among Congress watchers.
Chair/Ways & Means: There are currently three candidates running for the chairmanship of the House Ways & Means Committee: Reps. Vern Buchanan (R-FL), Adrian Smith (R-NE), and Jason Smith (R-MO).
Congress watchers say the race is too close to call, although most give a tiny edge to Rep. Buchanan, followed by Rep. Jason Smith. Rep. Buchanan is running on a platform of business-friendly policy, established relationships, and seniority (along with a pitch for deserved greater representation by Florida, a state that, unlike others, did very well for Republican candidates in the November elections). Rep. Jason Smith, who also touts his relationships among his colleagues, calls himself a champion of working-class taxpayers. He notes he thinks he can find a compromise on a high-priority Democratic issue (the child tax credit) and says helping the middle and working classes has always been and will continue to be his priority. Rep. Adrian Smith—who like his fellow candidates for the chairmanship, notes his strong relationships with other House Republicans—is the “policy wonk” of the group. He notes his deep knowledge of tax and trade issues and his ability to clearly explain—and champion—complex tax issues.
Originally, the decision on who will chair Ways & Means in the 118th Congress was to be made by December 8. However, a decision on all contested chairmanships has been indefinitely delayed. Some say it may not happen until after the vote on January 3 on who will be Speaker of the House.
Chair/Education & Labor: Historically, the Education & Labor Committee is called the Education & the Workforce Committee when Republicans are in charge in the House. There’s no reason to believe that a name change won’t happen again in January. But for now, it’s still the Education & Labor Committee. Two senior House Republicans are vying for the chairmanship: Rep. Virginia Foxx (R-NC) and Rep. Tim Walberg (R-MI). Rep. Foxx would have been term-limited out of the chairmanship, but on December 7 she won a waiver that would allow her to serve as the committee’s chair in the 118th Congress. At the time, she was running unopposed and had the written support of 21 of the committee’s 23 Republican members. Rep. Walberg jumped into the race on December 8, pointing to his own seniority and record on the issues handled by the committee.
It is at this point unclear which of these two senior and well-liked Republicans will win the gavel. Both have demonstrated a primary focus on education issues, but also have a strong record on the pension/retirement savings issues that are in the committee’s jurisdiction.
Other Leaders: House Democrats have a whole new slate of key leaders. Replacing outgoing Rep. Nancy Pelosi (D-CA) as Democratic Leader will be Rep. Hakeem Jeffries (D-NY). Rep. Katherine Clarke (D-MA) will be Minority Whip, while Rep. Pete Aguilar (D-CA) takes the job of Caucus Chair. Rep. Jim Clyburn (D-SC), one of last Congress’s top three leaders, remains in leadership, in an advisory role and #4 leadership job given the title of assistant leader.
Rep. Richard Neal (D-MA) will be ranking member of the House Ways & Means Committee, while Rep. Bobby Scott (R-VA) will continue as ranking member of the House Education & Labor (Labor & the Workforce) Committee. The House Financial Services Committee will be helmed by Rep. Patrick McHenry (R-NC). The committee’s ranking member will be Rep. Maxine Champion (D-CA).
Senate-side, Sen. Chuck Schumer (D-NY) will continue as Majority Leader, as will Sen. Mitch McConnell (R-KY) as Republican Leader. Sen. McConnell beat back a challenge from Sen. Rick Scott (R-FL), and is facing difficulty in the upcoming Congress from Sen. Scott and the handful of Republican Senators who supported him.
Sen. Ron Wyden (D-OR) will continue as Senate Finance Committee chair. Sen. Mike Crapo (R-ID) will remain the Finance Committee’s ranking member. Senate Banking will be chaired by Sen. Sherrod Brown (D-OH). The committee’s new ranking member will be Sen. Tim Scott (R-SC). The Senate Health, Education, Labor and Pensions (HELP) Committee will have a new chairman, likely Sen. Bernie Sanders (I-VT). The committee’s ranking member will likely be Sen. Bill Cassidy (R-LA), although that is not yet certain.
Prospects: Senate Democrats will have new power in the 118th Congress because they still have a one-seat advantage over Senate Republicans, assuming Sen. Sinema votes, as she said she would, to continue the power structure in place before she left the Democratic party. So, Democrats will have sole control over the legislative agenda, an easier time moving nominations, and subpoena power—things that couldn’t happen in the 117th evenly-split Congress.
However, votes will continue to be close, usually requiring bipartisanship. Any one Senator will still have the power to thwart a party-line vote, whether it’s last year’s power broker, Sen. Joe Manchin (D-WV); Sen. Sinema; or a different Senator. The 60-vote threshold remains in place, too. So, enacting legislation will be just as challenging—perhaps more so, given GOP control of the House—as it has been for the past two years.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
DOL Issues Final ESG Rule
On December 1, the Department of Labor (DOL) published its final rule on environmental, social, and corporate governance (ESG) investments in retirement savings plans. The rule reverses the Trump Administration regulation that required plan fiduciaries to consider only “pecuniary” factors in making investment choices. The new rule allows fiduciaries to consider non-economic, collateral issues when competing investments equally serve the financial interests of the plan.
DOL first released the new final rule on November 22, but it wasn’t published in the Federal Register until December 1. It is set to take effect in January, 60 days after its publication in the Federal Register.
The new final rule allows, but does not require, fiduciaries to consider ESG factors in making prudent choices about retirement savings plan investment options. It also allows plan fiduciaries to consider plan participant preferences in self-directed plans, provided they do so in a manner that is consistent with their duty of prudence.
Prospects: Some commentators worry that inclusion of participant preferences in what a fiduciary is allowed to consider could open the door for controversial investments like cryptocurrency. DOL is skeptical about the use of crypto investments in retirement plans, as are a number of Senators and Members of the House of Representatives. So, watch for continued focus on this aspect of ESG investing.
NAIFA Staff Contacts: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
CMS Issues RFI on Essential Health Benefits
On December 2, the Centers for Medicare and Medicaid Services (CMS) issued a Request for Information (RFI) on issues related to the extent of benefits required in ACA-compliant health plans.
Specifically, CMS wants input from the public on the description of essential health benefits in health plans subject to the ACA’s minimum essential benefits rules, the scope of benefits covered in types of employer plans, the review of essential health benefits coverage of prescription drugs, and substitution of essential health benefits.
Comments are due by January 31, 2023.
Prospects: The RFI is a signal of a CMS intent to consider new rules applicable to minimum essential benefits requirements. Expect at a minimum an NPRM (Notice of Proposed Rulemaking) later this winter or early in the spring.
NAIFA Tells SBA that Advisors Must Be Able to Retain Independent Contractor Status
NAIFA testified at a Small Business Administration (SBA) Office of Advocacy roundtable discussion that it is important that the new Department of Labor (DOL) independent contractor/worker classification proposed rule allow financial advisors to retain their independent contractor status.
The SBA Office of Advocacy is gathering information to inform its input to DOL on the proposed independent contractor rule. Testifying on behalf of NAIFA was Josh O’Gara, CLU, ChFC, CFP, president of NAIFA-Massachusetts. O’Gara emphasized NAIFA’s strong support for an exemption in the new rule for insurance and financial professionals. O’Gara used his own situation as an example of the need for independent contractor status. He pointed out that it allows him to offer his clients a variety of products and services. Reclassifying him as an employee, he said, would hinder his ability to serve the best interests of his clients, and would interfere with his independence. He noted that his situation is common among NAIFA members, many of whom are entrepreneurs and business owners.
According to a NAIFA survey, more than 90 percent of NAIFA members report income on IRS Form 1099 (used by independent contractors to report income for tax purposes). More than 90 percent of those now classified as independent contractors say they do not want to be classified or treated as employees.
Comments on DOL’s proposed new independent contractor rule—which will have to be modified to accommodate NAIFA’s (and many others’) concerns—were due by December 13. NAIFA also submitted comments directly to DOL.
Prospects: It will take weeks—possibly months—for DOL to read and study the thousands of comments that are likely to be submitted on this hotly-controversial topic. Then, its proposed rule (likely as modified) will be submitted to the White House’s Office of Information and Regulatory Affairs (OIRA), which will also take some time to review whatever proposal DOL submits. Thus, it is likely it will be well into 2023, if not longer, before a final rule—and its modifications, if any—is released.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
House GOP Tax Writers Promise Oversight on Range of Issues
The Republican members of the House Ways & Means Committee have announced their intention to exercise oversight on a range of issues including Obamacare expansion and unemployment insurance fraud. The tax-focused investigations join additional investigative plans announced by other House committees, all of which will be controlled by the GOP in 2023-2024.
In a November 18 press release, the Republican members of the Ways & Means Committee outlined 12 issue areas that it called “abuses of power” by the Biden Administration. The two of most concern to insurance and financial planning are Affordable Care Act (ACA) rules and the fraud the committee claims are pervasive as a result of pandemic-era unemployment insurance (UI) benefits.
On Obamacare, the committee Republicans say American taxpayers are “paying higher health care costs for less access. Republicans want to know how the “Administration justifies these partisan decisions that make health care for American families worse.”
On unemployment issues, the committee Republicans said, “Taxpayers deserve answers on the greatest theft of tax dollars in history.” The committee said it wants answers to questions about “billions of taxpayer dollars stolen.”
Other issue areas the soon-to-be Republican-controlled committee says it will investigate include Internal Revenue Service (IRS) practices, international tax rules, the rule that requires banks to report to the IRS on ‘private financial transactions,” and others. And, in addition to tax-focused investigations, the House GOP promises oversight on immigration and border issues, on President Biden’s son Hunter’s international business dealings, and on whether the Department of Justice is acting in a politically-motivated manner.
Prospects: These promised investigations will generate considerable and highly partisan debate and may also spawn new legislative proposals. However, given the very narrow GOP majority in the House, and the fact that both the Administration and the Senate are in Democrats’ hands, chances are minimal that any of these proposals will result in actual action or new law.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.
Overtime Rules Top DOL’s 2023 Regulatory Agenda
The Department of Labor (DOL) says its effort to update the “white-collar” exemption from the Fair Labor Standards Act (FLSA) overtime (OT) rules is a top priority for 2023. The white-collar exemption allows employers to avoid paying mandatory time-and-a-half OT to their executive, professional and administrative personnel.
The white-collar exemption applies to full-time workers who earn more than a threshold level of compensation, and who perform their work with a substantial degree of autonomy. Both the salary threshold test (currently, the salary threshold is $684/week or $35,568/year) and the nature of the employee’s duties (the duties test) of the white-collar exemption are potential areas for updating.
DOL has been holding “listening sessions” for both employers and employees over the past few months. The agency had targeted this past October as the time when they would release a proposed new rule, but no new rule has yet emerged. But the agency continues to assert that an updated white-collar exemption to the FLSA remains a top priority for next year. Currently, agency personnel are projecting release of a proposed new rule for early in 2023.
Prospects: It appears highly likely that the salary threshold of the white-collar exemption will rise, probably significantly—some (especially progressive Democrats and labor groups) say the threshold should go as high as $82,000+/year. However, most observers believe the jump from the current $35,568/year to more than $82,000/year would be too much for most businesses to readily absorb. And, while changes to the duties test are possible, they seem less likely at this point than an upward revision of the salary threshold. The expectation is that DOL will release a proposed new rule in the first quarter of 2023, if not later this month.
NAIFA Staff Contacts: Michael Hedge – Director – Government Relations, at mhedge@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.
CMS Releases Look-Up Table for Lowest Cost Silver Plan
On November 15, the Centers for Medicare and Medicaid Services (CMS) released the premium look-up table for individual coverage premium costs for the lowest-cost silver plan offered through a federal exchange. The look-up table helps stakeholders access individual market-qualified health plan cost information. The cost varies by geographic location and age. It is an important factor in determining Affordable Care Act (ACA) subsidy eligibility, and shared employer responsibility liability.
This new look-up table does not contain information on coverage available through state-based exchanges that do not use HealthCare.gov. The premium information contained in it shows the least expensive silver-qualified health plan based on the lowest age band in a geographic area.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
NAIFA Asks IRS to Make the Temporary Remote Notarization Rule Permanent
On November 30, 2022, NAIFA joined with the U.S. Chamber of Commerce and other industry partners in a letter asking the Internal Revenue Service (IRS) to make permanent the temporary relief from the physical presence requirement for spousal consent that the IRS has provided. As reflected in the attached letter, plans have been using this relief for nearly two years, and NAIFA believes that its use and effectiveness warrant that it be made permanent. If the IRS feels it cannot make this relief permanent before it expires after December 31, 2022, NAIFA urged the IRS to provide at least an additional 12-month extension while the IRS either provides permanent relief on its own or through notice and comment. By doing so, the IRS will avoid disrupting a valued tool many have come to rely on.
For nearly two years, plans and service providers have implemented remote notarization and witnessing using the guidelines laid out in Notice 2020-42. The safeguards in this Notice provide the necessary protections to participants and beneficiaries and no additional procedures are needed. If authorized, plans and service providers will continue to allow its use. However, this would be alongside in-person notarization for those who wish to use it. Allowing remote notarization is just one tool, but not the exclusive tool, for plans to obtain the required spousal consent. How this is obtained would be left to the discretion of a participant and beneficiary.
Prospects: Originally used to address physical restrictions in place during the COVID-19 outbreak, this IRS rule would continue to allow consumers and businesses to continue operations in a manner that most effectively serves all involved. NAIFA and its coalition partners continue to advocate the importance of standardizing remote notarization and permanent relief for remote witnessing procedures.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
NAIFA-Supported RILA Act Clears Hotline in U.S. Senate
The RILA Act has cleared the hotline in the Senate (meaning all 100 Senators have agreed to allow it to pass). Next, bill sponsor Senator Tina Smith (D-MN) will try to add it to the end-of-the-day “wrap up” package along with all the other cleared bills, resolutions, and organizing agreements.
Registered index-linked annuity (RILA) products offer a good option for some consumers who want to benefit from market growth while reducing their exposure to market losses. These are long-term, tax-deferred investments that are often well-suited for investors who are preparing for retirement, especially those who are retired or are nearing retirement and wish to reduce the impact of market downturns.
Unfortunately, the Securities and Exchange Commission (SEC) paperwork required to register RILAs is unnecessarily burdensome and confusing. It requires financial institutions to submit forms more often used for initial public offerings or other “catch-all” forms that require a great deal of extraneous information not relevant to RILAs and not readily available to insurance firms offering RILAs.
“The Registration for Index Linked Annuities (RILA) Act would make it easier for companies to provide investors with more options without reducing consumer protections,” said Diane Boyle, NAIFA Senior Vice President for Government Relations. “RILAs are innovative products that allow those preparing for retirement to benefit from market gains while reducing the risks of market downturns. The RILA Act would reduce regulatory burdens but would ensure consumers have the information they need to make informed investment decisions. It’s a win-win, and NAIFA applauds the Senate for moving the bill forward.”
Prospects: In the House, there is still discussion regarding which bills to include in the suspension calendar. Both Republicans and Democrats have stated that RILA is at the top of their list for when they reach an agreement. There is also the possibility of adding it to the end-of-year omnibus appropriations bill, which NAIFA is working on with all relevant parties.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
NAIFA Advises NLRB on Proposed Joint-Employer Rule
On December 5, 2022, NAIFA filed comments on the National Labor Relations Board’s (NLRB) proposed rule that would expand the joint-employer definition under the National Labor Relations Act. The rule would extend liability to employers that have indirect and reserved control over one or more employees’ essential terms and conditions of employment.
In the letter, NAIFA expressed concern that NLRB’s new joint-employer standard is too vague and broad, providing no guidance for contracting parties on how to comply or avoid liability. NAIFA recommended that NLRB clarify and limit the types and degrees of indirect and reserved control that would now trigger joint-employment liability. NAIFA recommended providing an exemption or carve-out of the proposed rule to maintain the integrity and functionality of existing insurance commerce and financial advisement. The proposed rule lacks clarity on the essential terms and conditions of employment that are relevant to the joint-employer inquiry. The rule suggests an inconclusive, open-ended list of such terms and conditions.
Without meaningful guidance, insurance producers and financial advisors could never be sure that they have considered all the potential terms and conditions of employment that may be deemed “essential” in the joint-employment inquiry. The expanded standard can potentially target any third-party contractual relationship that involves indirect or reserved control from an inexhaustive list of terms and conditions. Proposals that redefine the methodology used to determine joint-employer status should exempt insurance and financial professionals from over-arching standards that do not address economic realities in the insurance industry.
Independent contracting plays an essential role in the financial services and insurance industry, especially in customer-facing occupations such as licensed financial advisors, brokers, and insurance agents. Independent insurance agents constitute 17.1% of the entire insurance agent labor force while independent financial advisors account for 11.4% of the total number of advisors.
Independent insurance producers and independent financial advisors are vital to ensuring that millions of Americans have access to important financial benefits. These professionals are deeply rooted in their communities and are best positioned to understand the needs of consumers. To reclassify and force them into a joint-employment relationship drastically limits not only their autonomy but the availability of products they can provide their clients.
Prospects: NLRB will now review the comments before deciding if an alteration of the proposed rule is necessary. After consideration, NLRB will issue a final rule. NAIFA is committed to working with NLRB and legislators to protect the ability of agents, advisors, and brokers to continue operating in the best interest of their clients.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
NAIFA Submits Comments to DOL on Worker Classification
On December 13, NAIFA submitted comments to the Department of Labor (DOL) on the proposed changes to the Fair Labor Standards Act (FLSA) regulations pertaining to the distinction between “employee” and “independent contractor” for purposes of determining wages and other pay under the FLSA.
The first letter submitted by NAIFA is a direct response to DOL’s proposed rule and suggests recommended changes. The second letter filed by NAIFA is a joint-trades letter that stresses the positive and necessary impact of independent insurance agents, financial advisors, and brokers on the U.S. economy.
In January 2021, DOL published a rule titled “Independent Contractor Status Under the Fair Labor Standards Act” (2021 IC Rule), providing guidance on the classification of independent contractors under the FLSA applicable to workers and businesses in any industry. Under the adopted 2021 Independent Contractor Rule, often referred to as the Economic Realities Test, DOL and the courts determined whether a worker is an employee or an independent contractor by focusing primarily on five “core” factors: (1) the nature and degree of the worker’s control over the work, (2) the worker’s opportunity for profit or loss, (3) the amount of skill required for the work, (4) the degree of permanence of the working relationship between the worker and the potential employer, and (5) whether the work is part of an integrated unit of production.
DOL previously stated that the first two factors are the most indicative of whether a worker is economically dependent on someone else. If the first two factors supported the same determination, a substantial likelihood existed that the classification was appropriate. This threshold introduced much-needed clarity to determining appropriate worker classification.
DOL’s newly proposed rule reverses the progress and clarity laid out by the 2021 rule. The proposal adopts six primary factors in determining the classification of a worker: (1) the worker’s opportunity for profit or loss; (2) investments by the worker and the employer; (3) how permanent the work relationship is; (4) nature and degree of control; (5) whether the work is an integral part of the employer’s business; and (6) skill and initiative.
This approach could increase the tendency to misclassify independent insurance agents and financial advisors as employees rather than contractors – resulting in significant financial exposure, penalties and fines to independent insurance professionals and small business owners.
NAIFA recommends providing an exemption or carve-out of the proposed rule to maintain the integrity and functionality of existing insurance commerce and financial advisement.
Prospects: As DOL is attempting to replace the worker classification rule adopted under the Trump Administration, it is likely that they will move forward without a real solution to address the problematic aspects of the proposed rule. NAIFA will continue working with DOL to address concerns. NAIFA is also working with legislators to circulate a letter that will ask DOL to fix the problems that the proposed rule presents and could cause to the insurance industry’s collaboration with independent agents, advisors, and brokers.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
Senator Rounds Introduces Bill Targeting New CMS Rule
On November 30, Senator Mike Rounds (R-SD) along with Senator Jim Risch (R-ID) introduced S.5149 - A bill to amend title XVIII of the Social Security Act to exclude independent agents and brokers from the requirement to record calls with beneficiaries under the Medicare Advantage and Prescription Drug Benefit programs.
In May, the Centers for Medicare and Medicaid Services (CMS) issued a Final Rule which revises the Medicare Advantage (Part C) program and the Medicare Prescription Drug Benefit (Part D) program regulations to implement changes related to marketing and communications, past performance, Star Ratings, network adequacy, medical loss ratio reporting, special requirements during disasters or public emergencies, and pharmacy price concessions.
One area of concern is a new requirement which mandates contracts between TMPO and Plan, or TPMP and Plan’s FDR must ensure that the TPMO affirms that Medicare Advantage plans and Part D sponsors are responsible for TPMO activities associated with the selling of those plans and requires that TPMOs record all calls with beneficiaries in their entirety, including the enrollment process.
On balance, beneficiary dissatisfaction is not with their agent of record, but with the call centers that solicit beneficiaries to switch plans that may not meet their needs. NAIFA believes that calls with existing clients should be exempt from this requirement. To that end, we have been in contact with CMS and, on July 26, sent a letter to CMS Administrator Chiquita Brooks-LaSure requesting an exemption for agents working with existing clients.
Additionally, on August 11, NAIFA joined with joint trades partners and sent an agents coalition letter to CMS advocating for a rule implementation delay of six to 12 months, during which CMS will work with stakeholders to develop marketing regulations that will protect beneficiaries while allowing them access to their trusted licensed independent agent or broker.
In response to the outreach and concern about the lack of guidance on the recording of calls with clients, CMS has issued an FAQ to assist agents and brokers with navigating this new requirement. This new guidance provides an overview of the process and addresses some of NAIFA’s concerns regarding the lack of prior clarity. Many of the FAQs are based on questions NAIFA raised stressing issues many agents are having trying to comply. While the FAQs do not amend any of the recording requirements, this move is a positive step forward and possibly the first of other actions we could see CMS take. Ideally, this Senate bill will encourage CMS to address outstanding issues more quickly.
Prospects: Unfortunately, the legislative calendar will not likely permit action this year thus NAIFA has not activated grassroots at this juncture. Equally unfortunate, is that the 117th Congress will end in 2022 thus the legislation will need to be reintroduced next year if CMS doesn’t correct this issue. Upon reintroduction, NAIFA is committed to rallying federal legislators to move forward with the bill.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
Bipartisan Lawmakers Introduce Government-Run Retirement Accounts
Lawmakers in both chambers introduced bipartisan legislation which would create Roth IRA-style retirement accounts for workers without access to employer-sponsored retirement plans.
The Retirement Savings for Americans Act was introduced by Sens. John Hickenlooper, D-CO, and Thom Tillis, R-N., as well as Reps. Terri Sewell, D-AL, and Lloyd Smucker, R-PA would establish a new program that gives eligible workers access to portable, tax-advantaged retirement savings accounts. It would also offer federal matching contributions for low- and middle-income workers, with the match beginning to phase out at median income.
The bill provisions include:
Prospects: The legislative calendar will not likely permit action this year. NAIFA contacts for the bill sponsors are explaining better ways to achieve their goals and enhance Americans’ ability to save for their retirement. Availability and access to retirement savings options are not the problems. There already exists a strong, vibrant private-sector retirement plan market that offers diverse, affordable options to individuals and employers. If a retirement plan is not offered at work, employees have ready access to low-cost IRAs through local financial advisors and financial institutions.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.
Copyright © 2020
National Association of Insurance and Financial Advisors
2901 Telestar Court
Falls Church, VA 22042-1205
Phone: 877-866-2432
info@naifa.org