The Department of Labor and the Treasury Department have put out a request for information on the use of annuities in defined-contribution plans.
Both agencies are reviewing the Employment Retirement Income Security Act of 1974, as well as the plan qualification rules in the Internal Revenue Code, on using annuities in retirement plans.
The groups filed a request for information through the Federal Register.
Specifically, the Labor Department and Treasury want to know the advantages and disadvantages of receiving retirement benefits in the form of incremental payments. They also seek an explanation why most retirees, when faced with a choice of a lifetime income option or a lump-sum distribution, choose the lump-sum option.
The agencies also want to know what information 401(k) participants need in order to make informed choices on whether they should choose a lifetime income option, and how that information should be provided.
The request for information on incorporating annuities into defined-contribution plans came just as talk in Washington on using such investments with 401(k)s has begun to heat up.
A fact sheet released last week by President Barack Obama's Middle Class Task Force said the administration would promote “the availability of annuities and other forms of guaranteed lifetime income, which transform savings into guaranteed future income, reducing the risks that retirees will outlive their savings.”
The American Council of Life Insurers, the trade association of life carriers, cheered the Labor Department and Treasury for considering the role annuities can play in retirement plans.
“The ACLI supports policies that both encourage employers to offer annuities in their retirement savings plans and encourage employees to recognize the importance of receiving a guaranteed lifetime income in retirement,” Frank Keating, the ACLI's president and chief executive, said in a statement. “We look forward to responding to the departments' request for information.”
The Insured Retirement Institute, the variable annuities trade association, also said today that it would form a working group to address the request for information.
