September 14, 2010
For additional information:
Jason Hammersla

Council testimony: employer retirement plan sponsors play critical role in providing lifetime income security

WASHINGTON, DC — "As employers, we welcome the development of public policies that would facilitate the design of new lifetime income options that are less complex and have lower costs than available today," said Janet Boyd, director of government relations for The Dow Chemical Company, testifying on behalf of the American Benefits Council before the joint hearing of the departments of Labor (DOL) and Treasury on lifetime income products.

On February 2, the departments issued a request for information regarding lifetime income options for participants and beneficiaries in retirement plans. According to this request, "DOL and Treasury are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the tax code to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement." The Council submitted written comments on May 3.

Boyd's testimony focused on two key concerns contributing to the cost and complexity for employer benefit plan sponsors with regard to the provision of lifetime income products:

Fiduciary issues. "Under current law, the selection of an annuity provider is fraught with potential missteps that could result in continued liability for the plan sponsor well into the future. To rectify this, plan sponsors need clear, simple fiduciary guidance allowing them to make lifetime income options available to plan participants without risking a significant increase in potential fiduciary liability," Boyd said.

Disclosure and education. "The agencies should encourage but not require defined contribution plan sponsors to provide illustrations of how account balances translate into lifetime payments at age 65 by publishing model disclosures which, if used, would not give rise to fiduciary liability. The Council is also a strong proponent of financial literacy education and agrees with the agencies that educating participants on the management and spend down of retirement assets is a crucial goal as an increasing number of baby boomers approach retirement. However, plan sponsors who want to educate their employees on the benefits of lifetime income and other management and spend down concepts may be deterred by the lack of guidance on how to provide appropriate education in this area without triggering fiduciary liability," Boyd said.

"Any guidance relating to lifetime income needs to be flexible and encourage new product innovations that may generate more support for lifetime income by participants," said Lynn Dudley, Council senior vice president, policy. "The Council supports the principle that the retirement security of millions of baby boomers and future generations depends not only on their ability to accumulate sufficient assets/resources for retirement but also on how those resources are translated into retirement income."

To arrange an interview with Dudley or other Council staff on lifetime income matters, please contact Jason Hammersla, Council director, communications, at 202-289-6700.

# # #

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.