Making Sense of Retirement Plan Layers and Complexities
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…
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.
Continue Reading Insurance Company General Account DC Investments and the 408(b)(2) Conundrum: Balancing Capital, Liquidity and Transparency
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.
Continue Reading BNA’s “Insurance Guarantees In Defined Contribution Plans” Published
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…
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…
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…
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.
Continue Reading Continuing the DB Demise Discussion
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…
Traditional annuities are inflexible. Period. You get the monthly benefit you pay for. They provide a very valuable benefit which should be part of anyone’s retirement planning, but this inflexibility can be scary, as it takes away from the participant the ability to address unexpected contingencies. This fear comes from the second point: the funds used to buy the traditional annuity are gone for good. Other than payments made under a survivor annuity, the traditional annuity doesn’t give the participant any access to funds to pay for contingencies, nor does it typically pay a death benefit. So what’s a fiduciary to do?
Continue Reading Addressing Fiduciary Concerns in the Purchase of 401(k) Distributed Annuities: Dealing With The Five “I’s”- Part 2, Inflexibility and Inaccessability
The Swagger
I had the privilege to speak on a 403(b) panel at the recent DOL/ASPPA "DOL Speaks" seminar, with Lisa Alexander and Susan Reese of the DOL. Our own panel went very well, with Susan and Lisa both speaking directly to and recognizing the transition problems related to this new 403(b) world. As Lisa…