“The new paper on longevity annuities adds to the growing chorus of praise being given to these lifetime income products that can help Americans protect against outliving their assets in retirement,” said Cathy Weatherford, President and CEO of IRI. Weatherford added that more attention is being given to longevity risk and to retirement income products that can address and manage this risk.
Other highlights from the Brookings paper:
* The identification of barriers that are impeding their use of annuities, particularly including lifetime income options in workplace retirement plans.
* The recommendation for revising safe harbor guidelines for plan sponsors as they relate to annuities.
* The belief that providing plan sponsors with clear and workable guidance to satisfy their fiduciary obligations will help facilitate the large-scale availability of lifetime income options in retirement plans.
According to Weathford, The Treasury Department and the Administration have taken considerable action as part of a broad initiative to promote access to lifetime income in retirement plans. The Treasury Department announced a final rule for qualifying longevity annuity contracts (QLAC) in July at the IRI Government, Legal and Regulatory Conference. The QLAC rule facilitates access to deferred annuity options in qualified retirement plans including individual retirement accounts by allowing the value of longevity annuity contracts to be excluded from calculations for required minimum distributions, which have impeded the use of these contracts in retirement plans in the past.
In addition, “in October the Treasury Department issued new IRS guidance to support the expanded use of annuities in defined contribution plans. The guidance makes clear that plan sponsors may offer deferred income annuities in target date investment options that are designated as the default investment in 401(k) and other defined contribution plans. The Treasury also is expected to soon finalize its proposal for partial annuitization, which would allow pension plan participants – when given the option of a lump sum or an annuity – to receive part of their benefits in the form of an annuity. This rule will remove the all-or-nothing choice that plan participants must make when given the option.”
Click here to access the Brookings Institution’s paper.