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Retirement Planning > Saving for Retirement

Lifetime Income: Witnesses Discuss Educational Materials

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WASHINGTON BUREAU – Insurer representatives say the U.S. Treasury Department and the U.S. Labor Department could encourage use of lifetime income options by updating the rules governing educational materials.

The witnesses testified here today on the second day of a 2-day hearing organized by Treasury Department and Labor Department officials. The departments are looking into the idea of helping defined contribution retirement plan participants buy lifetime income products. Employer representatives spent much of the first day talking about the need to protect plan sponsors and managers against fiduciary liability if there turn out to be problems with annuity provider selections.

The insurer representatives also talked about fiduciary liability.

For plan sponsors, potential exposure to fiduciary liability under Section 404 of the Employee Retirement Income Security Act (ERISA) is of paramount concern, according to Patricia Harris, an assistant vice president at Hartford Financial Services Group Inc., Hartford, who testified on behalf of the Insured Retirement Institute, Washington.

“A violation of ERISA’s fiduciary duties potentially results in personal liability for plan sponsors,” Harris said.

Thomas Roberts, a witness who represented the American Council of Life Insurers (ACLI), Washington, said the Labor Department could help give employers the tools needed to give employees more guaranteed lifetime retirement income options, and better information about the options.

In any new guidance, Roberts said, the Labor Department and Treasury Department should come up with a way to give employees an illustration showing how lump-sum retirement account balances translate into guaranteed monthly lifetime income. The departments also should create a fiduciary safe harbor for employers for the selection of lifetime income issuers or products, Roberts said.

“An illustration is a key piece of information that allows workers to understand the value of their savings and decide whether they need to increase their contributions, adjust their investments, or reconsider their retirement date if necessary to achieve the quality of life they expect in retirement,” Roberts said.

Employers already provide comparable assistance with helping employees understand their employer-sponsored life insurance, Roberts said.

Larry Goldbrum, general counsel of The SPARK Institute, and Simsbury, Conn., and Susan Unvarsky, a senior vice president-operations at Prudential Retirement, a unit of Prudential Financial Inc., Newark, N.J. (PRU), said the Labor Department should change the current annuity safe harbor to limit the fiduciary liability and litigation risks plan sponsors face when offering lifetime income products.

They also said the Labor Department should issue guidance concerning lifetime income option educational materials, to make sure that participants understand that the materials provide education and not advice.

The Labor Department also should clarify that plan assets may be used to pay for educational information to help participants make decisions about in-plan and out-of-plan lifetime income options, Goldbrum and Unvarsky said.


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