Editorial comment: Why fix what is not broken?

By LINDA KOCO

Published 10/28/2009

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Finally. Some common sense seems to be emerging in Congressional consideration of retirement product provider regulation.

Specifically, the proposed Consumer Financial Protection Agency will now specifically exempt providers of retirement products from oversight by the CFPA.(See our articles on this here and also here.) The House Financial Services Committee approved an amendment to that effect earlier this month. This revision will exclude just about all insurance companies and products from CFPA oversight.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said in a memo that providers of IRAs, 401(k) plans, 529 plans and pension plans will be exempted from CFPA oversight.

Thomas Currey, president of National Association of Insurance and Financial Advisors, called it right, when he said that “imposing another layer of regulation on top of an already robust insurance regulatory regime is unnecessary and would provide no additional benefit to consumers.”

That is a point made here in this space many times, albeit in different words. The retirement arena has a rich and deep infrastructure. This includes state insurance regulation but also federal oversight by virtue of Employee Retirement Income Security Act of 1974, the Federal Employees Retirement System (1986), the Pension Protection Act of 2006, and a host of other Acts, both federal and state, plus existing financial bodies, agencies and committees, and a myriad of tax codes.

Furthermore, the retirement field teems with professional groups, consumer interest organizations and various associations (trade and otherwise).

Not all of these bodies and groups are focused on insurance products, and not all focus on the funding aspect of retirement, but most do touch on these topics from time to time.

The House Financial Services Committee is on the right path, to zero in on reforms that address the problems that brought so much financial tumult to the country. But the retirement products and providers from the insurance sector did not create that tumult and should not be cast in that light.

This is not to say that insurers in the retirement marketplace do not need regulation, for they do (as do all financial products and services and most if not all industries). No system or industry or organization is perfect, so checks and balances are in the public good—and especially so when considering the finances of our country’s oldest and frailest citizens.

However, there is no huge public outcry about our existing retirement system or its insurance providers and products. That’s a pretty good sign that the system is working well. Why reform what is not broken?

[ To comment on this topic, write to the editor, or blog your views below. ]

                                    –Linda Koco, Managing Editor, Products and Managing Editor, e-Publications
                                                                            National Underwriter Life & Health