Paper Offers Tutorial for Choosing DC Plan Lifetime Income Investments

Groom Law Group has published a guide that discusses fiduciary duties in the context of providing lifetime income options within defined contribution plans.

Groom Law Group has published, “Guaranteeing A Secure Retirement: A Practical Guide for Selecting DC Plan Lifetime Income Options.”

Written by Michael Kreps, a principal at Groom and co‐chair of the firm’s Retirement Services Practice Group, the paper says more employers than ever are adding lifetime income investment options to their defined contribution (DC) plans. It says plan fiduciaries have a duty to prudently select and monitor a lifetime income investment, just as they would with any plan investment. 

The paper points out that the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 sought to make it easier to offer DC plan lifetime income options by creating a fiduciary safe harbor for these investments. A lifetime income investment can be used as the default investment for a DC plan, and it can qualify as a qualified default investment alternative (QDIA), provided that certain regulatory conditions are met.

The paper is intended to provide plan sponsors and other DC plan fiduciaries with a practical guide to help in the selection of lifetime income investments. It first explains what it means to be a fiduciary and then discusses fiduciary duties in the context of providing lifetime income options within DC plans.

Although the paper primarily refers to the Employee Retirement Income Security Act (ERISA) and 401(k) plans, the general concepts and considerations apply equally to non‐ERISA DC plans, including church, 457 and 403(b) plans. 

Groom notes that the guide was not written to address the facts or circumstances of any particular plan sponsor or fiduciary; therefore, it should not be construed as providing legal opinions, tax advice or investment advice. Readers should consult their legal, tax and investment advisers before making any decisions with respect to their plans.

The guide is available here.