DTCC to Launch New Fiduciary Insurance Profile Service

The new service, known as Insurance Profile, facilitates compliance with the Department of Labor fiduciary rule during the sale and service of annuities.

Depository Trust & Clearing Corporation (DTCC) is seeking regulatory approval for a new Insurance Profile solution that will facilitate annuity industry compliance with the U.S. Department of Labor (DOL) fiduciary rule.

According to DTCC, the Insurance Profile service provides carriers and distributors with a centralized, automated and standardized method to satisfy disclosure requirements under the significant disclosure and conflict of interest reforms.  

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“Under the new DOL rule, any financial adviser receiving compensation for providing investment advice that is directed to a particular plan sponsor, plan participant or individual retirement account (IRA) owner will generally be deemed a fiduciary,” the firm says. “Fiduciaries are required to act in their clients’ best interests, while providing new levels of transparency including their qualifications, recommended investments, fees and costs, material conflicts of interest and compensation—data that is largely handled in operational silos and via manual processes across market participant firms today.”

To address this hurdle, the DTCC solution supports the exchange of data between insurance carriers and distributors for the on-going reporting of fees, expenses and commissions schedules to facilitate both “on demand” disclosures and website disclosures.

Once launched, distributors will be able to leverage Insurance Profile to access expense data at the contract, feature/rider and fund (subaccount) levels from a secure, centralized hub, eliminating the need to search and pull information across individual carrier partners, DTCC says. Carriers, or designated vendors acting on behalf of carriers, will be able to submit and maintain the required disclosure data online, leveraging an easy-to-use Insurance Profile interface. All data will be communicated via industry-standard ACORD XML and EDI messages.

“By leveraging a central, online data source of comprehensive and standardized annuity information, market participants will be able to increase transparency into annuity expenses and commission schedules, while ensuring access to data that is critical to the adherence of Department of Labor fiduciary disclosure requirements,” says Ann Bergin, managing director and head of DTCC Wealth Management Services. “Increasing automation in this area will reduce the risks and costs associated with manually processing this data, while eliminating the support and maintenance costs and resources associated with proprietary feeds and databases.”

Insurance Profile will be offered by DTCC’s National Securities Clearing Corporation (NSCC) subsidiary. More information is available at www.dtcc.com.   

United Technologies Announces Pension Buyout, Lump-Sum Window

The company expects the actions will reduce the overall size of its pension obligations by approximately $1.77 billion.

Apparently deciding that pension annuitization would be less costly than maintaining its plans, United Technologies Corp. announced two actions that are expected to reduce the overall size of its pension obligations by approximately $1.77 billion.

First, United Technologies will transfer approximately $775 million of its outstanding pension benefit obligations under the UTC Employee Retirement Plan and the UTC Represented Employee Retirement Plan to The Prudential Insurance Company of America. This transaction is expected to close on October 12 with the purchase of a group annuity contract from Prudential.

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Prudential was selected in consultation with independent experts after a competitive bidding process. Prudential will assume the obligation and administrative responsibility for retirement benefits owed to approximately 36,000 United Technologies retirees and surviving beneficiaries who currently receive a benefit of $300 per month or less from the plans.

“This transaction is an important part of United Technologies’ long-term strategy to reduce future pension risk and expense. It will not affect participants remaining in the plans and entrusts the assets leaving the plans to a highly rated insurance company whose core business is retirement security and administration of pension benefits,” says Robin Diamonte, United Technologies’ Chief Investment Officer.

Second, United Technologies has also implemented a program offering certain former U.S. employees or beneficiaries with a vested pension benefit an option to take a one-time, lump sum distribution rather than future monthly pension payments. Upon completion of this program, United Technologies expects approximately 10,000 participants to take the lump-sum offer. Payments will be paid from the retirement plans during late 2016. This action is expected to reduce United Technologies’ pension benefit obligations by approximately $995 million by year-end 2016.

Together, these related actions are part of United Technologies’ overall plan to de-risk its pension plans and are expected to reduce the overall size of the company’s pension plans by approximately $1.77 billion. The transactions will not diminish the plans’ funded status and are not expected to materially impact future pension expense or to require additional contributions to the plans.

Because these actions accelerate the satisfaction of future pension obligations, United Technologies expects to recognize a one-time pre-tax pension settlement charge in the range of $400 million to $530 million in the fourth quarter of 2016. Willis Towers Watson served as the strategic adviser to United Technologies in these transactions.

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