Brookings Paper: Revise Safe Harbor Guidelines to Facilitate
Broader Availability in Retirement Plans
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today issued the following statement from IRI President and CEO Cathy Weatherford after the release of a new paper by the Brookings Institution that explores longevity annuities and their role in helping consumers manage retirement risks including longevity risk.
“The Brookings Institution’s 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. From academics to personal finance experts to the President’s Administration, more attention is being given to longevity risk and to retirement income products that can address and manage this risk. The paper also successfully identifies barriers that are impeding their use, particularly for including these lifetime income options in workplace retirement plans.
Among its recommendations, the paper calls for revising safe harbor guidelines for plan sponsors as they relate to annuities. IRI also believes 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. We look forward to continuing to work with regulators to address this and other barriers so that these lifetime income strategies can be more readily available to all Americans.”
Removed from RMD calculations
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 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.
The paper, “Better Financial Security in Retirement? Realizing the Promise of Longevity Annuities,” is co-authored by Katharine G. Abraham, of the University of Maryland and National Bureau of Economic Research, and Benjamin H. Harris, of the Brookings Institution.
To access the Brookings Institution’s paper, follow this link.
About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.