Employee Benefits Security Administration
September 24, 2015
Page 4

the plan fiduciary or IRA owner should be the barometer for determining whether compensation is
reasonable based on their willingness, after receiving appropriate fee disclosures, to purchase the
retirement product. We accept that reasonable compensation is a requirement of the BIC
Exemption itself but respectfully request that the Department eliminate any contractual warranty
requirement. We also note that, as a factual matter, if under the aggregate facts (including the cost of
the product) the advice is deemed to be in the best interest of the consumer, it should not matter
that someone deemed the compensation unreasonable; the customer would still have a product in
his or her best interest. Similarly, as a factual matter, if under the aggregate facts the advice is
deemed not to be in the best interest of the consumer, it would not matter whether the
compensation was deemed reasonable or not; the customer would not have a product in his or her
best interest and would have recourse under the best interest contract.

Leverage Existing Disclosure Requirements in the BIC Exemption

Under the Proposal, the disclosure requirements under the BIC Exemption will overburden
advisers and financial institutions and require costly technological upgrades in order to comply with
the Exemption. Moreover, the Department’s proposed disclosure regime is unlikely to provide
useful and meaningful information to retirement investors about the costs and fees associated with
the investment products. Instead, investors will likely be overwhelmed with compensation and fee
information, the majority of which will be inapplicable to them, and that which is applicable may still
require further clarification from the adviser. Disclosures are not new to financial institutions and
many, if not all, are currently complying with one or more disclosure regimes set forth in other rules
and regulations, such as ERISA, SEC and state insurance laws. Before the Department imposes a
new, expensive and time-consuming disclosure regime, firms should be given an opportunity to rely
on their existing disclosures to satisfy the BIC Exemption disclosure requirements.

We appreciate this opportunity to provide comment and hope that our input will aid the
Department as it continues to work through the Proposal.

Very Truly B
Moe.

Vice President and Senior ASsociate Counsel



Protective Life
Insurance Company
Post Office Box 2606
Birmingham, AL 35202
Phone 205 268 1000

fn.
Protective.

MAX BERUEFFY

Vice President and Senior Associate Counsel
‘Writer's Direct Number: (205) 268-3581
Facsimile Number: (205) 268-3597

Toll-Free Number: (800) 627-0220

E-mail: max.berueffy@protective.com

September 24, 2015

FILED ELECTRONICALLY

Office of Regulations and Interpretations Office of Exemption Detetminations
Employee Benefits Security Administration Employee Benefits Security Administration
U.S. Department of Labor U.S, Department of Labor

200 Constitution Avenue, N.W. 200 Constitution Avenue, N.W.

Room N-5655 Suite 400

Washington, DC 20210 Washington, DC 20210

Re: Definition of the Term Fiduciary; Conflict of Interest Rule (RIN 1210-AB32)
Proposed Amendment to Proposed Partial Revocation of Prohibited Transaction
Eixemption 84-24 (ZRIN: 1210-ZA25)
Proposed Best Interest Contract Exemption (ZRIN 1210-ZA25)

Ladies and Gentlemen:

Iam writing on behalf of Protective Life Insurance Company (“Protective Life”), and its
affiliates, Protective Life and Annuity Insurance Company (“PLAIC”), ProEquities, Inc.
(“ProEquities”), and First Protective Insurance Group (“First Protective”) (collectively
“Protective”).

Protective Life was founded in 1907 and is headquartered in Birmingham, Alabama.
Protective employs approximately 2,400 people with offices in 7 states. Although recently purchased
by The Dai-ichi Life Insurance Company, Protective remains a mid-size company serving American
families.

PLAIC was organized as an Alabama company in 1978 and provides life insurance and
annuity products specifically designed for customers in the state of New York. First Protective was
founded in 1983 to serve the needs of independent producers by providing distribution for life
insurance, annuities, and other insurance and financial products. At present time, First Protective
has approximately 1,700 agents. ProEquities, our affiliated broker-dealer, is a Top 50 Independent
Broker Dealer (ranking 20th overall in Investment News 2014 Broker-Dealer Rankings). The firm


Employee Benefits Security Administration
September 24, 2015
Page 2

has 119 full-time employees in Birmingham and approximately 1,500 independent registered
representatives serving approximately 400,000 customer accounts. Approximately 54% of
ProEquities assets under management are retirement accounts.

One of Protective’s primary products is annuities — both fixed and variable, We sell annuities
nationwide through financial institutions, national full-service broker-dealers, and independent
agents and brokers. As of December 31, 2014, Protective Life and PLAIC had 147,281 active IRA
annuities, representing over $10.7 billion in retirement savings. In 2014, Protective Life and PLAIC
issued over $825 million in annuities to IRA’s, tanking 28th of the 40 companies ranked by LIMRA.
The average value of these IRA annuities is approximately $73,000.

So you see why we ate concerned about the Department of Labor’s (the “Department”)
proposed amendment to the definition of “fiduciary” and prohibited transaction exemptions (the
“Proposal”). These rule changes will have a significant impact on manufacturers and sellers of
annuities, and in turn, the people who need annuities as one way to save for retirement and provide
a lifelong stream of income when they do retire. Protective, like many other firms in the industry,
fully supports the Department’s efforts to create a standard to protect the best interest of the
customer. We are concerned, however, that the Proposal lacks clarity as to what is required to
achieve that standard.

The Department’s final rule will be far-reaching and will impact every facet of retirement
savings, from the product manufacturer all the way to the retirement investor. It is imperative that
the Department revise the Proposal to address unintended consequences. We therefore appreciate
the opportunity to offer the following comments.

‘The Manufacturer of an Insurance Product is Not a Fiduciary

As proposed, the definition of “fiduciary” leaves open to question whether a manufacturer,
such as Protective Life or PLAIC, would be subject to the fiduciary standard and would have to be a
party to a Best Interest Contract. We do not believe this is what the Department intended. We
suggest adding a “Manufacturet’s Carve-Out” to the definition of Fiduciary, clarifying that an
insurance company or other “manufacturer” of a financial product is not a Fiduciary and does not
have to be a patty to the BIC simply because it issues products, such as annuities, and under state
law must appoint agents who actually deal with the consumer.

For an example of language that could be added to Proposal as the “Manufacturer’s Catve-
Our,” we respectfully refer the Department to the Insured Retirement Institute’s Follow-Up
Comment Letter submitted on September 24, 2015.


Employee Benefits Security Administration
September 24, 2015
Page 3

Best Interest Does Not Equal Best Product

Even though the Department has defined “best interest,” there is still confusion over what
exactly this term means and, mote importantly, how a firm or adviser incorporates this standard into
its business practice and procedures. The term “best” is inherently subjective and, ultimately, a
judgment call. The Department should recognize expressly that a firm or agent that sells a wide
range of products need not recommend the “best” product available in the market for a particular
customer because reasonable, qualified advisers can disagree on which product is best for a
particular customer. Moreover, an adviser can only sell the products for which his or her firm has a
selling agreement, and no firm has selling agreements with all issuers of a particular type of product,
be it mutual funds or annuities. We suggest that an agent selling annuities should have available to
the customer a broad range of products with competitive features and pricing and should
recommend only those products that are in the customer’s best interest based on the investment
objectives, risk tolerance, financial circumstances, and needs of the customer. Finally, what is in a
customer’s “best interest” should be judged at the time of the recommendation or sale and not in
hindsight. Such a framework would seem to address the concerns of the Department but also
provide the parameters for a “best interest” standard that are missing in the Proposal.

The Rule Should be Business-Model Neutral

Some insurance companies and producers limit their agents to selling only /heir products,
however many that may be. Many others, including Protective, do not have a captive selling force
and the majority of agents who sell Protective products also offer other insurance companies’
products as well. From a customer’s perspective, dealing with an agent representing one company is
the same as dealing with an agent tepresenting multiple companies. Furthermore, agents and selling
firms should not be incentivized to limit their range of product offerings to only one insurance
company in order to avoid complying with the BIC Exemption.

The Best Interest Contract (“BIC”) Exemption should be applied equally to all sellers of
variable annuities.

Clarify What is Meant by “Reasonable Compensation”

Under the BIC Exemption, the adviser and financial institution must warrant that their
compensation is reasonable. Determining the reasonableness of one’s own compensation is difficult
and precarious, if not impossible. At the very least, the adviser or financial institution should not be
obligated to provide a warranty in the contract that the compensation is reasonable. As a contractual
provision, this affords no benefit to the investor but forces the service provider and the firm to use
their own criterion for reasonableness.

Whether compensation is “reasonable” or not should be determined by the product or
service and judged in comparison to the market for similar products and services. In other words,