Labor Sets Plan Annuity Selection Rules

The U.S. Department of Labor has come out with an interim final rule that will clarify fiduciary standards for employers that use annuities to pay distributions from 401(k) plans and other “individual account” plans.

The department also has announced a proposed rule that will create a “safe harbor” for employers and other plan fiduciaries that are choosing annuity providers to pay out plan distributions.

The interim final rule amends Interpretative Bulletin 95-1. The amendment limits the application of the bulletin to the selection of annuity providers for benefit distributions from defined benefit plans, officials say.

The interim final rule and the proposed rule would implement the Pension Protection Act of 2006.

Under the PPA, the Labor Department must issue regulations indicating that the selection of an annuity contract as an optional form of distribution from an individual account plan is not subject to the “safest available” standard under Interpretive Bulletin 95-1, but is subject to all other relevant fiduciary standards, officials say.