The RFI, issued jointly by the Department of Labor’s Employee Benefits Security Administration (EBSA) and the Internal Revenue Service (IRS), pointed out the well-documented U.S. retirement plan trend away from defined benefit pension plans to defined contribution programs.
The result of that trend, officials asserted in the document, is that workers now shoulder more responsibility than ever for ensuring they have enough money to last their entire lives. That has prompted regulators to seriously consider whether they need to do more to encourage the use of annuities or other lifetime income products, according to the RFI (see “DoL Set to Issue Annuity Project RFI”).
To help spark public comment, the RFI posed 39 questions relating to the lifetime income products issue. The RFI questions include:
- Why do so many participants currently opt for a lump-sum distribution and not for an annuity or other lifetime payment program?
- What types of lifetime income or other arrangements designed to provide a stream of income after retirement are available to individuals who have already received distributions from their plans, and how are such arrangements being structured?
- What are the advantages for participants and plan sponsors about having a lifetime income product inside versus outside of the plan?
- Should some form of lifetime income distribution option be required for defined contribution plans? If so, should that option be the default distribution option, and should it apply to the entire account balance?
- What forces are keeping plan sponsors from having lifetime income products in their plans?
- Are there differences in the way various demographic groups would view lifetime income products that should be taken into account by regulators?
- What participant education is necessary for the lifetime income products issue and how should it be provided?
- Could or should any changes be made to the rules relating to qualified joint and survivor annuities and spousal consents to encourage the use of lifetime income without compromising spousal protections?
- Are employers that sponsor both defined benefit and defined contribution plans allowing participants to use their defined contribution plan lump-sum payouts to “purchase” lifetime income from the defined benefit plan?
- To what extent could or should the safe harbor under 29 CFR 2550.404a-4 be extended beyond distribution annuities to cover other lifetime annuities or similar lifetime income products?
How to Comment
Under the 90-day public comment period, members of the public can submit their input to the Department of Labor, RIN 1210-AB33, by one of the following methods:
- Web: Federal eRulemaking Portal at www.regulations.gov. Follow the instructions for submitting comments.
- E-mail: e-ORI@dol.gov. Include RIN 1210-AB33 in the subject line of the message.
- Mail: Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210, Attention: Lifetime Income RFI.
The latest indicator of the administration's interest in the lifetime income product issue came in a series of retirement initiatives recently announced by the White House (see “White House Unveils Retirement Initiatives”).