To Focus on the Role of Lifetime Income in Improving Retirement Income Security
Leaders from the Defined Contribution Institutional Investment Association (DCIIA) and the Retirement Income Industry Association (RIIA) recently met to design a framework for their previously announced joint effort to establish a new group of financial services and retirement industry firms seeking to improve the collaboration among providers of retirement income products, services and solutions and help create a framework that will lead to more the widespread inclusion of life income options in defined contribution plans.
This joint initiative will be known as the Defined Contribution Retirement Income Coalition (DCRIC). As its first formal act, the DCRIC thanks the Obama Administration for its recent initiative to broaden and support the introduction of lifetime income programs for 401(k) and defined contribution savers. On February 2nd the Treasury Department issued a package of regulatory guidance on the topic of lifetime income options in qualified plans. This guidance follows a two-year project with the Department of Labor on the topic, which included both an RFI and public hearings and a number of firms and associations that are part of the DCRIC took part. The members of the DCRIC applaud the Treasury Department’s focus on this topic and the clarity this guidance brings to plan sponsors (and their advisors) considering ways to help plan participants address the distribution phase of managing their retirement assets.
Drew Carrington, Chair of the DCRIC stated, “The issuance of guidance on this topic, especially the strong endorsement of lifetime income options embedded in the various regulations, as well as the announcement itself, answers clearly the question of how the regulators feel about these alternatives in a qualified plan setting.” He went on to state “Clearly, and in very plain language, the Treasury Department endorsed lifetime income solutions, and focused on in their words, ‘making it easier for pension plan [sponsors] to offer workers a wider range of choices as to how to receive time retirement, benefits…’ This will go a long way toward removing any remaining uncertainty plan sponsors and their advisors have about the overall view of regulators with respect to lifetime income option availability in qualified plans such as 401(k)’s: they are for them, and have pledged to issue further guidance in the coming year to further reduce regulatory barriers to the adoption of lifetime income options.”
Elvin Turner, Vice Chair of the DCRIC, added “The DCRIC coalition members were pleased to see the Treasury Department and the Council of Economic Advisors acknowledge the potentially powerful role of behavioral finance principles to create better outcomes for participants.” He noted that the Treasury Department’s guidance on the two defined contribution (DC) specific items (the proposed regulation on the use of longevity insurance, and the Revenue Ruling on spousal protection with respect to annuities) “removed two perceived hurdles to broaden implementation of lifetime income options in DC plans.”
According to DCIIA’s Executive Director, Lew Minsky, “We are extremely encouraged by the commitment of the Departments of Labor and Treasury to encouraging more robust adoption of lifetime income solutions and calls on the defined contribution community, sponsors, consultants, ERISA counsel, recordkeepers, investment managers and insurance companies, to embrace the message behind these new regulations and to move toward more widespread availability of additional tools for participants in managing the spending phase of their retirement. We look forward to the additional regulatory guidance in this arena, which will make it easier and simpler to implement these solutions in qualified plans, and to working with the regulators to improve the guidance on these topics, to improve protections for plan participants, and to enhancing retirement security for American workers in the 21st century.”
Francois Gadenne, Executive Director of RIIA, emphasized that “the broad mission of the DCRIC is to create a framework that helps participants to effectively use the assets they’ve accumulated inside of their qualified plans to pay themselves during their retirements.”
Defined Contribution Retirement Income Coalition (DCRIC) Key Initiatives
The DCRIC will promote the delivery of lifetime income solutions to a broad segment of US workers participating in defined contribution plans via the following initiatives:
- Build coalition comprised of organizations and individuals who share our goals in order to leverage knowledge/resources
- Identify and remove barriers to more robust adoption of lifetime income solutions
- Frame the industry and public retirement dialogue in outcome-based terms
- Support efforts that 401(k) statements reflect a lifetime income stream, in addition to account balance
- Become a clearinghouse for education/communication on the full range of retirement income solutions, tailored to the needs of multiple audiences: plan sponsor, participant, consultant/advisor, and regulator
- Encourage industry standardization and operational protocols for supporting institutional retirement and lifetime income solutions
- Promote portability/transferability of income between record keeping platforms
- Promote acceptance of retirement income strategies as a QDIA; encourage consideration of auto-enrollment into retirement income strategies
- Support all viable forms (including both guaranteed and non-guaranteed) of lifetime income solutions
- Work with Treasury to clarify impact of required minimum distributions (RMD’s) on ability to offer different types of income solution, and promote equal and relevant treatment of various income solutions under the RMD rules
- Encourage a regulatory framework that promotes the evolution of retirement income options
- Assist plan sponsors who choose to offer a retirement income solution, either in their plan or outside of the plan
- DCIIA and RIIA welcome other interested associations and groups in the financial services and retirement industry that would like to join the coalition to inquire about becoming part of this important effort
Founded in 2006 by leading financial companies, advisors, associations and academics, the Retirement Income Industry Association (RIIA) provides a rigorous, research-driven, household-focused foundation for developing retirement solutions to serve retirees today and into the future. A non-profit organization, RIIA achieves its mission through a unique View Across the Silos allowing members to see change and disruption before others while achieving competitive advantage through diverse discussions, advanced education, market insight, comprehensive data, standards and thought leadership for successful retirement income management. RIIA members span the entire industry to include banks, insurers, mutual fund companies, brokerage houses, financial advisors, distributors, plan sponsors, researchers, technology companies, marketing firms, academics, and industry media.About the Defined Contribution Institutional Investment Association (DCIIA)
The Defined Contribution Institutional Investment Association (DCIIA) is a non-profit association dedicated to enhancing the retirement security of American workers. To do this, DCIIA fosters a dialogue among the leaders of the defined contribution community who are passionate about improving defined contribution plan design. DCIIA members include investment managers, consultants, law firms, recordkeepers, insurance companies, plan sponsors and others committed to the best interests of plan participants.