In mid-September, the Department of Labor and the Department of the Treasury held a hearing on several specific issues relating to lifetime income for participants and beneficiaries in retirement plans. Testimony was given on:
- The education of and information given to participants.
- Making lifetime retirement options available in plans on an optional or mandatory basis.
- The concerns of sponsors in making available lifetime retirement options.
The government panel and witnesses discussed the need for educational initiatives and additional information to plan participants. Research showed that once people visualize themselves in the future, they would be more likely to increase their savings rate. Many believed that if participants received information on the lifetime income streams they would receive from their account values, they would save more. Research also reflected that selecting lifetime income for at least part of plan participants’ retirement income is beneficial. No one agreed to take responsibility to educate participants and sponsors raised issues about their fiduciary liability. To protect against liability, Interpretive Bulletin 96-1 would need to be expanded so that sponsors would not be viewed as giving investment advice. While some suggested that the government could provide education, the panel questioned whether it was the government’s role to do so.
Several witnesses discussed the availability of lifetime income options in plans. Some discussed that in-plan options and mandatory options would reduce the cost of lifetime income options. Others asserted that these options should not be mandatory because of participants’ differing circumstances. In addition, if these options were mandatory, several raised issues as to who would select the mandatory option and the potential fiduciary liability.
Several witnesses discussed that sponsors are concerned about their increased exposure to fiduciary liability if they provide lifetime income options and the due diligence required to include these options. Several suggested that Interpretative Bulletin 95-1 should be updated to provide a safe-harbor for sponsors including lifetime income options. They commented that the current guidance is vague and unclear.
The departments stated they would consider the information gathered from the hearings but did not indicate a specific time frame for any action.