From the October 2009 issue of Investment Advisor • Subscribe!

October 1, 2009

Retirement News

The IRS is expected to announce 2010 retirement plan limits on October 15, 2009, the date the Bureau of Labor Statistics releases the September CPI-U. According to a recent Mercer analysis, if recent inflation patterns continued into September, there could be a decrease in the statutory limits on qualified retirement plan contributions and benefits for 2010. Limits for defined contribution (DC) and defined benefit (DB) plans--including 401(k) deferral and catch-up contribution limits--are adjusted each year, following a statutory formula, Mercer states. Depending on actual inflation levels for August and September, the formula could produce limits for 2010 that are lower than those currently in effect for 2009. If that occurs, Mercer says, employers will be looking to the IRS to decide if the limits will remain unchanged for 2010, or be reduced. Mercer warns that plan sponsors should prepare for that possibility by assessing the implications for participant communications, financial planning tools, benefit calculation systems and discrimination tests. DB and money purchase pension plan sponsors should identify participants who could be affected by lower limits and discuss with counsel whether they would need to provide 45 days' advance notice of the reduction, Mercer says.

The combined net assets of variable annuities in the second quarter jumped more than 11% over the previous quarter, totaling more than $1.19 trillion, according to The Insured Retirement Institute (IRI). The increase, IRI says, marks the highest quarter-to-quarter boost in at least the past 17 quarters.

Variable annuity sales for the second quarter were $31.8 billion, up from $30.4 billion in the previous quarter, IRI says. Second quarter 2009 net sales were $6.1 billion, compared to first quarter net sales of $5.1 billion. There were $23.4 billion in qualified sales and $8 billion in non-qualified in the second quarter, the trade group says. Cathy Weatherford, president and CEO of IRI--who was recently selected to join the U.S. Chamber of Commerce Committee of 100--stated in a prepared statement that as the economy begins to show signs of stability, "consumers continue to be thoughtful about their investments." With the personal savings rate remaining high, she said, "we're likely to see this renewed investment in annuities continue in the months to come." Four former members of Congress, two governors and several "Executives of the Year" currently serve on the Committee of 100. The group includes a diverse combination of men and women from throughout the United States representing associations of all sizes, both national and international.

Meanwhile, the U.S. division of Sun Life Financial, Inc. recently became the first variable annuity carrier to offer the PIMCO VIT Global Multi-Asset Portfolio as an investment choice to its Masters variable annuity customers.

The PIMCO asset allocation portfolio is co-managed by PIMCO CEO and Co-Chief Investment Officer Mohamed El-Erian, and pursues opportunities in a broad range of asset classes, including global equities and bonds, commodities, real estate, derivatives and other variable insurance product funds (including other PIMCO funds).

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