More On Legal & Compliancefrom The Advisor's Professional Library
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
- Anti-Fraud Provisions of the Investment Advisers Act RIAs and IARs should view themselves as fiduciaries at all times, whether they meet the legal definition or not. Deviating from the fiduciary standard of full disclosure while courting clients may cause the advisor significant problems.
The Treasury Department plans to release soon guidance for employers on how best to integrate lifetime income products into 401(k)s and other employer-sponsored retirement plans, while the Department of Labor plans to follow with similar guidance early next year.
Treasury and DOL issued a request for information (RFI) last year that included 39 questions for those in the retirement planning space about the products they offer, impediments to offering them, and whether or not participants use such products when they are offered.
J. Mark Iwry, senior advisor to the secretary and deputy assistant secretary for retirement and health policy at Treasury, said at an event in Washington on Monday titled “Picturing Your Retirement Income,” that the Treasury will soon be ready to start this series of “guidance items that DOL and Treasury are working up in response to the RFI on lifetime income.”
Treasury, he said, “will start with the sweep of items that will be intended to get the ball rolling, not to be a solution, but a first step–or series of first steps–to be followed by further guidance by DOL and Treasury.”
The event was sponsored by the American Council of Life Insurers, AARP, American Benefits Council, U.S. Chamber of Commerce and Women’s Institute for a Secure Retirement.
Iwry said Treasury will be putting out a package of guidance first, with DOL then following early next year.
As it stands now DOL’s Employee Benefits Security Administration (EBSA) is working on a proposed rule under ERISA Section 105 that would require or facilitate the presentation of a participant’s accrued benefits–i.e., the participant’s account balance, as a lifetime income stream of payments in addition to presenting the benefits as an account balance.
Phyllis Borzi, head of EBSA, who spoke on the same panel as Iwry, said that post the RFI, EBSA and Treasury have “begun a very robust dialogue about whether there should be ways to encourage employers to offer lifetime income streams in lieu of lump sum” distributions.
“We know that when offered a lump sum most people take it,” Borzi said, which isn’t always the best route.
Borzi said, “We have begun to focus on how we can begin to educate people about the importance of lifetime income.” Some folks have suggested DOL and Treasury think about making employers provide lifetime income illustrations—that is, showing employees “what their savings would yield.”
Federal employees are provided with illustrations of lifetime income on their retirement planning statements, she said, and the anecdotal evidence says it has caused employees to increase their savings.