Revenue Ruling 2012-3; the preamble to the QLAC Regs; IRS Notice 2014-66; and the Oct. 23, 2014 DOL Information Letter to Treasury are just a few of the critical building blocks which have enabled an exciting new generation of lifetime income products which we are now seeing in the market. The three 2019 SECURE ACT
A title like this one was bound to happen; and I was tempted to publish it on April Fool’s Day-except that its really not a joke.
Where it comes from is the simple fact that any DC Lifetime Income Program (ok, why not, lets use the acronym “DCLIP” while we’re at it) that guarantees lifetime
202(b) actually does not make any statutory change to any of the Code’s or ERISA rules governing the distribution of a plan’s assets pursuant to divorce or separation orders. Instead, it instructs Treasury to amend its QLAC rules, which are obscurely found under Required Minimum Distribution applicable to dc plans which purchase annuities (Reg 1.401(a)(9)-6). The regs must be changed to reflect that if a QLAC is issued as a joint and survivor annuity (which it is required to be unless spousal consent is obtained, under plans to which such rules apply), and a divorce subsequently occurs prior to the date the annuity payments actually begin, the DRO “will not affect the permissibility of the joint and survivor annuity benefits” as long as that order meets certain requirements.
Continue Reading Secure 2.0’s New QDRO Rules: The Mainstreaming of the QLAC?
“Decumulation” of retirement benefits has shifted from defined benefit plans to defined contribution plans. I had written in 2009 that the demise of the DB plan was inevitable because of the rise and fall of plan sponsors. It is one thing to rely upon an employer’s current funding of the accumulation of the lifetime income benefit through its employer sponsored retirement plan; it is quite another to expect that same employer sponsored plan to actually provide the guaranteed retirement payout over the retiree’s lifetime.DC plans can avoid this fate.
Continue Reading Avoiding Studebaker
There are substantial efforts underway throughout the retirement market, attempting to wrap minds around the various aspects of providing lifetime income from DC plans. This incudes efforts to design new programs and how to explain them to sponsors, fiduciaries and advisers who must make the ultimate selection election between competing choices.This will not only involve getting familiar with a whole new vocabulary, but ultimately there needs to be at least a working knowledge of the different types of annuities which may be in play in any of these designs.
Continue Reading Building a Lifetime Income Product
Even with all of the interest in the Fiduciary Rule, the DOL is still paying attention to lifetime income-so much so that the Qualified Longevity Annuity Contract (the “QLAC”, established by the IRS) was granted broad relief under the Rule. This relief is so favorable that one of the claims being brought in the 5
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…….
In Lifetime Income, ERISA’s statute of limitations may serve to provide the basis for a workable standard when dealing with the long term financial risk posed to fiduciary by insurer insolvency following the purchase of an annuity.
Continue Reading Lifetime Income: Using the Statute Of Limitations to Minimize Insurer Insolvency Risk
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
Well I have to admit I was wrong. About 15 months ago in this Business of Benefits blog I predicted that "Time Had Come Today" for in-plan retirement income solutions to gain traction in DC plans. After all, it seemed like all the stars had aligned for the big turn around in the way