FRONTLINE
Annuities Industry Worries Retirement Tax Deferrals Are On Chopping Block
The threat to the tax-deferred status of retirement vehicles, including annuities, is once again at the forefront of concerns for the Insured Retirement Institute. With Congress preparing a new tax package to extend President Trump’ s 2017 tax cuts, IRI lobbyists are worried that tax deferral for annuities could be targeted by lawmakers as a revenue source.
Tax deferral allows investors to grow assets in annuities, retirement plans and IRAs tax-free for as long as they hold them
and only pay taxes on withdrawals.
But lawmakers could kill that deferral as they search for revenue to pay for tax cuts, says Paul Richman, chief government and political affairs officer at the Insured Retirement Institute, at a recent press conference.
In 2017, when lawmakers sought ways to pay for President Trump’ s tax cuts, a small faction of Republican legislators advanced the idea of eliminating tax deferral for retirement and IRA accounts. Trump stepped in and opposed the measure, ensuring its preservation, Richman said.
Richman said lobbyists for his institute, which represents annuities companies and advisors, are busy meeting with all lawmakers( since so many are new) to ensure they understand the benefits of tax deferral and annuities.
Wayne Chopus, the IRI’ s president and CEO, says,“ Legislatively, in the coming year, one of our priorities is to ensure that as Congress and the administration consider tax legislation, they are reminded about the critical role the tax deferral of retirement savings has played in encouraging workers to save for their retirement years.
Tax deferral allows investors to grow assets in annuities, retirement plans and IRAs tax-free and only pay taxes on withdrawals.
“ As President Trump said in 2017, the tax deferral of retirement savings‘ has always been a great and popular middle-class tax break that works,’” Chopus says.
Another key priority for the institute is the ongoing battle against the Department of Labor’ s new fiduciary rule. The institute led opposition to the previous version of the rule, vacated by a court in 2016, and also filed a lawsuit against the new version. The law has been stayed by another court, and the Trump administration has since requested a 60-day halt to the case, giving officials time to review the regulation’ s merits.
“ We certainly can’ t predict the results, but we’ re confident it should be vacated like the 2016 rule,” Chopus said.
The Insured Retirement Institute has outlined an ambitious policy agenda for 2025, including 33 proposals aimed at enhancing retirement security for workers and retirees as more Americans approach retirement age.
As part of its legislative agenda, the institute is making several proposals:
• It wants to eliminate disparities for 403( b) plans, allowing participants access to annuities as an investment option after the SECURE Act made these products available in 401( k) plans.
• The institute wants to remove regulatory barriers that prevent protected, guaranteed lifetime income solutions from being included in qualified default investment alternatives( QDIAs) in retirement plans.
• And perhaps most controversially, the institute wants to expand access to workplace retirement plans by requiring most businesses to offer them.
Beyond tax deferral and regulatory concerns, the Insured Retirement Institute is advocating for stronger guaranteed income options in retirement plans. Polling shows that 51 % of Americans are more worried about running out of money in retirement than dying, making the need for sustainable income solutions a top priority, Richman said.
If Congress adopts the IRI’ s proposed changes, it could further accelerate the adoption of annuities within retirement plans.“ If all the proposed changes from SECURE 1.0 and 2.0 are implemented, we believe it will break down barriers and increase plan adoption of annuities,” Chopus said.
Despite regulatory challenges,“ our industry has much to be optimistic about,” he added.“ More sales are happening as more Americans see the value of guaranteed income.” In 2024, retail annuity sales surged by 12 % to a record $ 432.6 billion.
— Tracey Longo
10 | FINANCIAL ADVISOR MAGAZINE | APRIL 2025 WWW. FA-MAG. COM