The passage of the SECURE Act in 2019, including a key fiduciary safe harbor provision for the selection of lifetime income providers inside of qualified retirement plans, provided a huge potential boost to the use of annuities in 401(k) plans.
But just what this safe harbor actually requires remains unsettled. Is it really just as simple as making sure that an insurer is state licensed and meets a low capitalization bar? Most industry experts think not and a consensus is beginning to develop around best practices for isolating those insurers with the proper group annuity expertise and vetting their financial stability on an on-going basis.
While this may seem overly complex, it needn’t be. In fact, over the past decade, asset management firms as well as plan sponsors and their consultant partners have turned to ALIRT Insurance Research to provide them with just such a robust due diligence process.
ALIRT, which has been providing insurer analytics to major financial institutions for over two decades, analyzes the relative financial performance of insurers using a unique and proprietary scoring model and rating system. Unlike the typical rating agency methodology, ALIRT’s analytical philosophy is based on the proposition that insurance carriers should be analyzed:
- Primarily at the statutory entity level (where the legal contract resides)
- On a quarterly, on-going basis
- Utilizing distinct comparative benchmarks
If you are interested in implementing a “best practice” approach to selecting annuity carrier partners as part of your fiduciary duty, we would welcome the opportunity to have a discussion.