In July 2008, Bob Kistler, Nick Curabba and I put together what may have been the first published effort at compiling the fundamental rules which govern the distribution of lifetime income from defined contribution plans.
Quite a bit has happened since then. There’s been two new GAO studies on lifetime income; a joint DOL and Treasury Request for Information Regarding Lifetime Income Options (the “RFI”) and the related hearings; the issuance by the IRS of two contradictory revenue rulings on key lifetime income issues, and a clarification on those issues by a subsequent Revenue Ruling; a Revenue Ruling on DC transfers to purchase benefits under a DB plan; two new sets of proposed IRS regulations, including the Qualified Lifetime Annuity Contract regs; The ERISA Advisory Council issued a report on the “spend-down” of retirement assets; and the DOL’s Advanced Proposed Rule Making on lifetime income disclosure.
A number of new lifetime income products have been introduced into the market by both insurers and mutual fund companies to build upon all of this interest.
On the liability side, NOLHGA (the National Organization of Life and Health Insurance Guaranty Associations) issued a report on the “Life and Health Insurance Guaranty System, and the Financial Crisis of 2008–2009” which helps explain how state guaranty associations cone into play in protecting lifetime income; and there have been several key court decisions addressing fiduciary status under group annuity contracts.
A more complete and up to date description of how lifetime income can work in a DC plan is in order. Evan Giller (newly Of Counsel with Boutwell and Faye) and I put together the attached piece entitled “Regulatory and Fiduciary Framework for Providing Lifetime Income from Defined Contribution Plans.“ It is originally appearing in the New York University Review of Employee Benefits and Executive Compensation – 2013, published by LexisNexis Matthew Bender, Copyright 2013 New York University. In the paper, we’ve drawn upon our long experience with retirement plan annuities, mixing it well with all of these new developments.
One of the paper’s key features is that it lays out a framework by which fiduciaries may be able to make fiduciary determinations on products and insurers without requiring further guidance from the DOL; relying instead on traditional concepts.
We found that each of the sections in this paper could have easily been significantly expanded, now that we have a broader experience in the workings of this idea.
Please let us know what you think!