Both companies said Tuesday they had no plans to develop their deferred income annuities as qualified longevity annuity contracts, or QLACs, for group retirement plans.
How their decision might influence the development of QLACs in employer-sponsored plans was unclear, though the decision doesn’t bode well.
The Treasury department released guidance last year paving the way for longevity annuities in 401(k) plans and traditional IRAs. Under the new regulations, account holders can move up to 25 percent of their account’s assets, up to a maximum of $125,000, into a QLAC.
That money would not be subject to required minimum distributions at age 70 ½, as 401(k) assets otherwise are.Instead, assets in QLACs will be distributed by no later than age 85, guaranteeing income later in retirement and helping assure 401(k) participants don’t outlive their savings.
The question of how readily QLACs would be adopted has been top-of-mind for the industry since Treasury’s announcement.
“The goal to help individuals maintain an income stream throughout the golden years is laudable,” Mark Weisberg and Linda Lemel Hoseman, partners with the Chicago-based law firm Thompson Coburn, wrote in a blog last year. But the guidance issued by Treasury contains “numerous requirements and possible traps” that may slow sponsors’ adoption and participants’ understanding of the products.
And that may, in fact, explain why providers aren’t flooding the market.
In September, soon after the DOL signed off on Treasury’s initial guidance, Ross Goldstein, managing director of retail annuities with New York Life, suggested the firm might be willing to enter the market.
At the time, New York Life was “digesting the specifics of the regulations,” Goldstein said.
But on Tuesday, a company spokesman confirmed New York Life wasn’t looking to build a product for 401(k) distribution.
That is in spite of the company’s notable success selling deferred income annuities in the retail market.