The seemingly obscure issue of when a payment from an annuity contract purchased under a Defined Contribution plan is considered to be a "payment from an annuity" is actually one of the most pressing tax issues that needs to be resolved in the area of DC annuitization. Resolution of this issue determines when spousal consent
Lifetime Income
Prudence, not Prescience: A Suggestion for a Fiduciary Standard for DC Annuity Purchases
By Robert Toth on
Posted in Lifetime Income
The question of what the appropriate fiduciary standard should be in assessing the insurer insolvency risk when purchasing annuities by defined contribution plans continues to be a tough one.
It is also one of the critical issues to be resolved if the efforts to encourage lifetime income from these plans is to be successful. The…
DC Annuity Portability and Asimov’s “M.N.C.”: What Is Old Is New Again
By Robert Toth on
Posted in Lifetime Income
How, one may legitimately ask, can anyone possibly write anything that makes any sense with a title like the one I’ve given this blog?
Easily, is my answer, as as long as one accepts the fact that our world of retirement plans and rules is not so limited as it seems at first glance, and…
Insurance Company General Account DC Investments and the 408(b)(2) Conundrum: Balancing Capital, Liquidity and Transparency
By Robert Toth on
Posted in Lifetime Income
One of the most maligned and misunderstood, yet one of the most valuable, DC plan investments is the the insurance company general account investment-typically referred to as the “fixed fund,” the “guaranteed fund,” or even sometimes the “stable value fund”(in some of its iterations). These funds guarantee principal and a certain rate of return over a stated period of time. These funds usually (except in an inverted yield environment) provide a much higher rate of return over money market funds, while providing a measure of security of which money market funds can only dream. if the insurance company properly balances liquidity with the rate of return, it is an invaluable offering.
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BNA’s “Insurance Guarantees In Defined Contribution Plans” Published
By Robert Toth on
Posted in Lifetime Income, Lifetime Income Published Papers
BNA’s Tax Management Advisory Board published memorandum as an “Advisory Board Analysis” last week, “Income Guarantees in Defined Contribution Plans.” It speaks in some detail of the technical issues confronting the provisions of annuities through a defined contribution plan.
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The Annuity RFI: A Rare, Inter-Agency Treat
By Robert Toth on
Posted in Lifetime Income
EBSA and the IRS issued their long promised Request For Information on annuities-or, should I say, as promised by the EBSA. We had not expected this particular piece to be a joint effort. It shows that Phyllis’s and Mark’s agenda is getting policy effectively done, not engaging in damning bureaucratic turf warfare. Hmm. With this…
CORRECTION BLOG: Annuity PLR Reference Incorrect!
By Robert Toth on
Posted in Lifetime Income
My everlasting thanks to Andrea-Ben Yousef of BNA. We were exploring annuities, and some confusion from my blog of January 6th, 2009. We discovered that I posted the incorrect PLR number and link on that blog, where I discussed the importance of a new PLR to DC annuitization. The link I had incorrectly provided was…
IRS PLR Helps Pave the Way for DC Annuities
By Robert Toth on
Posted in Lifetime Income
Annuitization from DC plans suffers from the lack of clarity on a number of key technical rules, which need to be resolved before such annuities can be widely implemented. The IRS has taken a major step in its issuance of PLR200951039, a complex PLR which- for the first time-defines what an annuity really is…
Continuing the DB Demise Discussion
By Robert Toth on
Posted in Lifetime Income
This where the PBGC, the NIRS and Pension Rights Center (which also presented at the conference) have it all wrong: the traditional DB plan does not, and will not, meet these laudable goal if you rely upon the private employer for the financial wherewithal to insure that the funding will be adequate, and that plan sponsor’s own corporate financial needs have not caused some sort dangerous “creative accounting” in the management of these plans which we have all too often seen in the past.
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Private Employer DB Demise Was Inevitable, and Should Not Be Revitalized in Current Form.
By Robert Toth on
Posted in Lifetime Income
The private employer-sponsored defined benefit plan has had a good run of it, supporting two generations well in its goal of providing economic security for retirees. But the last 10 years have seen gradual though substantial decline in the number of employers sponsoring these plans, and in the percentage of employees being covered by these…