June 16, 2010
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Council urges flexibility and innovation for employer-sponsored retirement plans to meet lifetime income needs
WASHINGTON, DC "The Council supports the principle that the retirement security of millions of baby boomers and future generations depends not only on their ability to accumulate sufficient assets for retirement but also on how those resources are translated into retirement income," said Lynn Dudley, senior vice president, policy, of the American Benefits Council today. "Lifetime income products are an important tool for participants in managing their retirement income."
Dudley made her comments prior to the Senate Special Committee on Aging's June 16 hearing on "The Retirement Challenge: Making Savings Last a Lifetime".
She continued, "Education is the first step toward increasing the availability and appropriate use of lifetime income products. Plan participants need greater awareness of the amount of money they will need to last through retirement and how different forms of distribution can help them manage their money in retirement."
"Although many lifetime income options are often available in plans such as lifetime annuities, guaranteed minimum withdrawal products, systematic withdrawals, longevity insurance," Dudley added, "employees generally do not select these options when retiring. Several reasons underlie the participants' choices including lack of familiarity with the various products and uncertainty as to whether they will tie up all of their retirement assets. Many companies would like to provide more information and access to lifetime products but are limited by the potential for fiduciary liability."
"The good news is that the post-retirement period is getting more attention resulting in more products from which to choose and a greater effort to address concerns of participants. Hopefully, policymakers will address plan sponsors' fiduciary liability concerns as well. However, simply because this is a developing area any legislation or guidance on this issue needs to be flexible and encourage new product innovations that will serve participants' post-retirement needs," Dudley said.
Today's hearing stemmed from the Aging Committee's response to a request for information (RFI) from the Department of Labor, Employee Benefits Security Administration (EBSA) and the Treasury Department regarding lifetime income options for participants and beneficiaries in retirement plans. On May 3, the Council submitted formal comments to EBSA and Treasury in answer to the RFI. The DOL and Treasury examination of lifetime income arrangements is expected to be the first phase of a new regulatory focus on the distribution phase of retirement planning.
The Council's letter also offers a number of recommendations for the agencies' ongoing efforts in this area, suggesting that the agencies issue guidance addressing fiduciary liability for plan sponsors, administrative challenges and lack of participant demand. As a first step, the Council strongly encourages an educational campaign using behavioral economic studies to provide insights beyond anecdotal information.
To arrange an interview with Dudley or other Council staff on matters, please contact Deanna Johnson, Council director, membership, at 202-289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.
- Employer Shared Responsibility
- Market Reforms & Adult Child/Age-26 Coverage
- Preventive Care & Value-Based Design
- Quality Improvement & Delivery Reform
- Essential Benefits
- Tax & Revenue Issues
- Grandfathered Plans
- Claims and Appeals
- Summary of Benefits & Coverage
- Informational Reporting/W2
- Health Insurance Exchanges
- State Innovation
- Medical Loss Ratio & Mini-Med Plans
- Automatic Enrollment
- Wellness Programs
- Accountable Care Organizations
- 90-Day Waiting Periods
- Automatic Enrollment
- Plan fees
- Taxation of Retirement Plans/Limits
- Funding Reform
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- Puerto Rico Plans
- Non-Qualified Deferred Compensation
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