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
Auditing Distributed 403(b) (and 401(a)) Contracts
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
DOL and Lifetime Income
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
Lifetime Income: Using the Statute Of Limitations to Minimize Insurer Insolvency Risk
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
DC Annuity Portability and Asimov’s “M.N.C.”: What Is Old Is New Again
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
Addressing Fiduciary Concerns in the Purchase of 401(k) Distributed Annuities: Dealing With The Five “I’s”- Part 2, Inflexibility and Inaccessability
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
Addressing Fiduciary Concerns in the Purchase of 401(k) Distributed Annuities: Dealing With The Five “I’s”- Part 1, Irrevocability
The first element in a fiduciary review is to get at least a layman’s grasp on the nature of insurance and insurance regulation. Pooling risks with others is an uncomfortable concept that is foreign to fiduciary with a defined contribution mindset Because of pooling and this “30 year risk,” insurance is regulated in ways of no other industry
Continue Reading Addressing Fiduciary Concerns in the Purchase of 401(k) Distributed Annuities: Dealing With The Five “I’s”- Part 1, Irrevocability
Do 403(b) Distributed Custodial Accounts Currently Exist?
Our blog of May 26 on "Distributed Custodial Accounts" generated a number of comments, which require a bit of a "follow-on." Ellie Lowder, one of the grand dames of the 403(b) world, agreed with my assessment. She mentioned that she had discussions with the IRS on this point. Staff just couldn’t see how distributions of
The Case For “Distributed Custodial Accounts” From Terminated 403(b) Plans
What Happened
One of the biggest disappointments arising from the issuance of the 403(b) regs has been the inability of employers to effectively terminate their plans. At first, the IRS caused quite a favorable stir when it announced that the regs would specifically classify the termination of a 403(b) plan as a distributable event, and
The New Generation of Annuities: Balancing Flexibility, Stability and the Pooling of Interests
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