Treasury Set to Issue Lifetime Income Guidance; DOL to Follow

'Robust dialogue' begins on encouraging employers to offer lifetime income streams, EBSA's Borzi says

More On Legal & Compliance

from The Advisor's Professional Library
  • Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors.  When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
  • Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients’ transactions.  If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.

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.

Reprints Discuss this story
This is where the comments go.