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September 14, 2010 at 12:21 PM
Retirement planning experts told the Departments of Labor (DOL) and Treasury on Tuesday that the main obstacles to widespread adoption by plan sponsors of offering lifetime income options within retirement plans is the lack of clarity provided by DOL and Treasury regarding plan sponsors’ fiduciary liability in selecting and monitoring these types of offerings, and issuer insolvency.
DOL and Treasury are holding two days of hearings–Tuesday and Wednesday–to get feedback from retirement planning experts on how, and if, the agencies should update rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the tax code to facilitate access to lifetime income options within employer-sponsored and individual retirement plans. The two days of hearings on lifetime income options come on the heels of the DOL’s request for information (RFI) earlier this yearon how best to integrate lifetime annuities and other income-generating options into employer-sponsored plans and IRAs. The DOL received 700 comment letters.
Christine Marcks, president of Prudential Retirement, who testified at the Tuesday hearing, told AdvisorOne in an interview after her testimony that “the adoption rate [of lifetime income options by plan sponsors] is constrained by the lack of clarity on the fiduciary issue in particular.” DOL and Treasury currently have an interpretive bulletin, 95-1, on fiduciary responsibility “but it’s vague,” she says. “We’re hoping [DOL and Treasury] clarify it.”
As it stands now, only four firms–Prudential, John Hancock, Great-West Life & Annuity Insurance Co., and Genworth–offer in-plan lifetime income options.
