The growing acceptance of the idea that defined contribution plans need to provide participant access to a “DB-Like” retirement income benefit is only really possible now because of the foundational work over the past two decades by key policy thought leaders like Mark Iwry, David John, and a handful of others.
Further success of this
You may’ve noticed that the SECURE Act introduced yet another new twist to the 403(b) world: the Qualified Plan Distribution Annuity Contract (“QPDAC”-you may want to look at my prior blog related to these lifetime income acronyms). Its not that Congress was singly out 403(b) plans, as 401(a) and 457(b) plansnow also have the ability to distribute QPDAC. But, as in all other things 403(b)s, there are a number of unique twists to the rules which exist solely in the 403(b) world.
Continue Reading The 403(b) “Qualified Plan Distribution Annuity Contract” Under SECURE Section 109
How do you audit a 403(b) in-kind distribution? There is no financial transaction, no cash changes hands, there is no change in investments. It really is only a nominal change in the records of the insurer. Yet, somehow, GAAP requires that the “transaction” be verified. There is no answer, yet, to this question, which means the industries (that is, auditors, insurers, and lawyers) will be pressed for finding a standardized approach for bringing audit certainty to this process. It even becomes a bigger issue than 403(b)s: QLACs and other distributed annuity contracts are all able to be distributed as “in-kind” distributions from 401(a) plans as well, and there is no acceptable “recordkeeping” method to audit.
Continue Reading Auditing Distributed 403(b) (and 401(a)) Contracts
With regard to the DOL’s fiduciary proposed regulations, There is much to like in the new rules; some troubling things; and, perhaps, a mistake or two which will be all flushed out in the coming months. There are a couple of technical points which are worthwhile sharing because they represent what we can expect of the “unexpected” as we work through the changes’ impact. These include the impact on lifetime income , and the application of the PT rules on the purchase of annuities-including QLACs.
Continue Reading DOL’s Proposed Fiduciary Rules May Unexpectedly Open Lifetime Income Door, If…….
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.
Continue Reading A Regulatory and Fiduciary Framework for Providing Lifetime Income from Defined Contribution Plans
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 mantra of Congress, investment advisors and the DOL over the past decade has been consistent: retirement plan assets must be invested in such a way to provide American workers with sufficient assets upon which to actually retire comfortably. This is as basic as apple pie, and a concept with which one can hardly disagree.
It has been a couple of weeks since we’ve last posted a blog, and with good reason. Between Evan, Monica and I, this two month span has us doing some 15 presentations and articles, whie keeping up with clients (and a couple of us squeezing in some overdue vacation time!). Monica is speaking this week
I mentioned in a posting last week that we will take some time on this blog to work through a number of the legal and technical issues related to annuitizing out of 401(k) plans. This, in effect, allows the 401(k) plan to offer the best features of the Defined Benefit and Defined Contribution plans without
It is back to the future, in an odd sort of way. There is growing trade press coverage on the interests of 401(k) plans and plan participants on turning a portion of participants’ account balances into a "defined benefit-like" guaranteed income stream. Follow, for example, this link to Plan Advisor.com.
There are really two ways