Borzi Addresses Lifetime Income at Pension Conference

admin | July 19, 2010 | 0 Comments

ASPPA News from the Field
2010 Western Benefits Conference

Sarah Simoneaux
ASPPA President, 2005-2006

LOS ANGELES, CA., (July 19, 2010) — The U.S. Department of Labor’s (DOL) request for information (RFI) on lifetime income options in retirement plans, has sparked a discussion on how the government and private sector will deal with the rising number of retirees who need to maximize their savings throughout retirement.

Phyllis Borzi, Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA) addressed the issue of lifetime income options to an audience of more than 500 retirement professionals during the Western Benefits Conference in Los Angeles.

The DOL’s RFI on lifetime income options has opened a dialogue on ideas to provide retirees with a steady income stream during retirement.  DOL received 700+ comments from the public, plan sponsors, and industry service providers on how to modify existing lifetime income rules, as well as ideas for new strategies to assure that retirees do not outlive their retirement assets.

“With the baby boomers beginning to retire, we need to focus on how qualified plan assets will be used in retirement,” said Borzi.  She cited research that shows lottery winners either hoard winnings or spend them over a short period of time—which is similar to how plan participants may react when they receive a lump sum distribution at retirement. Borzi is reviewing ideas on how to help retirees manage their retirement savings wisely so they don’t behave like lottery winners with their nest egg.

“The initial response from individual citizens was ‘keep your hands off my 401(k)’,” said Borzi.  She also said industry service providers asked a related question – is the government intention to require lifetime income streams in retirement or to offer incentives to provide lifetime income?  Borzi said DOL is working to assure both groups that they believe incentives are generally better than mandates.

Industry suggestions include removing impediments in existing rules that make offering lifetime income options more difficult. Providing retirement education for employees is also viewed as an important component of making retirement income last a lifetime.

After digesting the comments, the DOL will review changes to existing rules and work on ways to clarify the difference between investment advice and participant education.

Current proposed legislation on plan participant disclosure of retirement lifetime income was cited as an area of concern for service providers.  “The devil is in the details,” Borzi pointed out.  She said the DOL is working on rules to improve participant benefit statements in general, and lifetime income options are a part of this process.  She believes the changes should add clarity for participants without adding burdensome administrative costs for the production of the statements.

Sarah Simoneaux
ASPPA President
Simoneaux & Stroud Consulting Services (SCS)

More information on the “Lifetime Income” Issue:


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