Partner Fred Reish provided testimony before the U.S. Department of Labor’s ERISA Advisory Council on lifetime income products and services for retirees provided through defined contribution plans. The ERISA Advisory Council is looking for ways to promote lifetime income within defined contribution plans by providing further guidance on annuity selection safe harbor and modifying the Qualified Default Investment Alternative (QDIA) rule to focus on asset accumulation and decumulation issues in the context of lifetime needs and solutions.
In his testimony, Fred said that the conversation about retirement income has to include a heavier emphasis on 401(k) and other defined contributions. Most participants focus on the account balances and investments in their 401(k) plan and miss the larger picture.
“Unfortunately, that easily leads to participant decisions to take lump sum distributions (and roll over to IRAs) without giving thought to the impact of the decision on lifetime income. In addition, participants generally have little or no concept of the monthly income value of an account balance, either in terms of payments in the short term (if the participant is close to retirement) or payments in the long term (if the participant is younger),” he said.
The DOL should simplify its annuity safe harbor regulation and add additional safeguards, he said, and the QDIA safe harbor should be updated to include annuities in target date funds, balanced funds and managed accounts.
Fred outlined his opening comments in this blog post and his full testimony is linked here. His testimony was also quoted in media outlets including Think Advisor, PlanAdviser and PlanSponsor.
Read ThinkAdvisor’s “The Way Forward in Lifetime Income Options.”
Read PlanSponsor’s “Groups Question Efficiency of Offering Annuities in DC Plans.”
Read PlanAdviser’s “Are Annuities in DC Plans Necessary to Produce Optimal Retirement Income?”