New Jersey’s Adoption Marks Nationwide Best-Interest Standard for Annuity Sales
New Jersey has become the 50th state to adopt a best-interest standard for annuity sales, completing nationwide adoption based on a model regulation developed by the National Association of Insurance Commissioners (NAIC). This model, established in 2020, requires obligations around care, disclosure, conflict of interest, and documentation designed to align with the SEC's Regulation Best Interest. The best-interest standard is significant for providing consumers with professional financial guidance and aims to stabilize retirement income sources amid a shifting pension landscape.
The full 50-state adoption marks a milestone after intensified lobbying efforts by industry trade associations over the past 15 months. This development coincides with federal attempts to impose fiduciary standards on annuity sales, including the U.S. Department of Labor's Retirement Security Rule in April 2024, which faces political and regulatory challenges. Historical context includes the 2016 DOL fiduciary rule vacated in 2018 and NAIC’s earlier proposal to strengthen suitability standards.
State regulators have asserted their authority in regulating annuities, highlighting the growing retirement savings gap caused by demographic changes such as an expanding elderly population and contraction of the working-age group. The shift from defined-benefit pensions to defined-contribution plans has increased uncertainty for retirees, emphasizing the importance of reliable retirement products like annuities.
While all states now have a best-interest standard, uniformity is not guaranteed. New York notably diverges by implementing Regulation 187, which imposes stricter consumer-interest requirements and mandates insurer training and oversight of producers. This variation reflects ongoing balancing between consumer protection and industry operational practices across jurisdictions.
The nationwide alignment on best-interest standards represents a regulatory evolution impacting insurers, financial advisors, and consumers. It reinforces state primacy in annuity regulation and frames the backdrop against which future rulemaking and compliance efforts will proceed. Understanding these developments is critical for stakeholders navigating the U.S. retirement and insurance markets.