PLANADVISER -May/June 2022 - 5

The second regulation proposes
amendments to the SEC's fund " Names
Rule. " The proposal seeks to modernize
the " 80 percent investment policy
requirement. " This part of the broader
" Names Rule " currently requires funds
with certain names to adopt a policy
to invest 80% of their assets in investments
suggested by that name. The
proposal would expand this requirement
to apply to any fund name with
terms suggesting that the fund focuses
on investments that have-or on investments
whose issuers have-particular
characteristics. This would include, for
example, fund names with terms such
as " growth " or " value " and those indicating
that the fund's investment decisions
incorporate ESG factors.
To address the rule's application to
derivative investments, the proposal
would require a fund to use a derivative
instrument's notional amount, rather
than its market value, for the purpose
of determining the fund's compliance
with the 80% investment policy.
24th State Adopts the
NAIC Annuity Transaction
Framework
South Carolina has become the 24th
state to adopt enhanced consumer
protections that align with the standards
finalized in 2020 by the National
Association of Insurance Commissioners
in its Suitability in Annuity
Transactions Model Regulation.
The NAIC is a national standardsetting
and regulatory support organization
created and governed by the
chief insurance regulators from the 50
states, Washington, D.C., and five U.S.
territories. Through the NAIC, state
insurance regulators establish standards
and best practices, conduct peer
reviews and coordinate their regulatory
oversight.
Under the leadership of Acting
Director Michael Wise, the South Carolina
Department of Insurance finalized
and adopted the new rule that codifies
the NAIC standards in the state. These
standards align with those set out by
the Securities and Exchange Commission's
Regulation Best Interest. In practice,
this means the annuity transactions
standards require best-interest
service without mandating that all
advisers to such transactions act in a
fiduciary capacity.
One matter that could potentially
complicate a widening implementation
and enforcement of the NAIC's suitability
framework is the fact that the
Joe Biden administration could choose
to modify, update or even rescind Reg
BI, though sources say this is far from
a given. While such a move would not
entirely derail what the states have
done, given that the safe harbors often
also cite the Investment Advisers Act
or the Department of Labor fiduciary
standards, the elimination of Reg BI
could cause ambiguity in the various
state-based conflict of interest rules.
IRS Raises HSA Limits for 2023
With the latest update of the U.S.
Consumer Price Index showing a spike
in the inflation rate to 8.5%-the largest
12-month increase since 1981-the new
IRS limits on how much employees
may contribute to their health savings
account next year represents a larger
hike than seen for a while.
For calendar year 2023, the annual
limitation on deductions for an individual
with self-only coverage under a
high-deductible health plan is $3,850,
up $200 from this year's limit. The
annual limitation on deductions for an
individual with family coverage under
an HDHP is $7,750, an increase of $450
from this year's limit. The limit for
individuals was only increased by $50
going into 2022 from 2021, and by $100
for families.
The
IRS
defines
an HDHP
for
calendar year 2023 as a health plan
with an annual deductible that is not
less than $1,500 for self-only coverage
or $3,000 for family coverage, and for
which annual out-of-pocket expenses-
i.e., deductibles, co-payments and other
amounts, but not premiums-do not
exceed $7,500 for self-only coverage or
$15,000 for family coverage.
IRS Provides Sample Wording
For 403(b) Plan Provisions
The IRS has published a Listing of
Required Modifications and Information
Package for 403(b) preapproved
plans. The information package
contains samples of plan provisions
that satisfy certain requirements of
Internal Revenue Code Section 403(b)
and related regulations. The IRS says
it has prepared the package to assist
providers that are drafting 403(b)
preapproved plans and to accelerate
the agency's review of them.
The information package has been
updated to reflect the 2022 Cumulative
List of Changes issued by the IRS
in January.
Although the package is intended
to assist 403(b) preapproved plan
providers in drafting plan documents,
the IRS says insurance companies
and custodians may also look to the
language of
the sample provisions
when drafting terms of annuity
contracts and custodial accounts that
are required by IRC Section 403(b).
The agency also notes that a 403(b)
preapproved plan may use either a
single plan document format or a
basic plan document with an adoption
agreement, and the sample provisions
included in the package may generally
be used with either format. However,
it says, a plan design using a single
document format will need to make
appropriate adjustments.
John Hancock Defeats
ERISA Tax Credit Lawsuit
Although it had allowed class certification
in the case, a federal court in
Florida has ruled in favor of the defense
in a lawsuit filed against John Hancock
Life Insurance Co. The lengthy order,
which quotes both Albert Camus and
Jean-Paul Sartre for rhetorical effect,
declares that the plaintiffs' claims are
" inconsistent with the choices they
made about their [Employee Retirement
Income Security Act] plan and the party
with whom they contracted to provide
ERISA-related services. "
At issue was the retention by JHLIC
of certain foreign tax rebates generated
by group variable annuity contracts
that the lead plaintiffs, representing
the interests of a law firm's 401(k)
plan, had signed. The order concludes
unequivocally that there was nothing
disloyal about the firm " using, for itself,
the foreign tax credits which only it, as
the taxpayer, could use. " -PA
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PLANADVISER -May/June 2022

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