Insurers Debate Lifetime Income Options in Washington

NewImage.jpgA two day hearing with Department of Labor and Treasury officials discussing lifetime income options for retirement plans drew almost 800 letters, highlighting how important the issue is for a secure retirement.

Regulators and legislators are looking at Americans’ retirement security because life expectancies are increasing and savings have shifted from traditional pension plans — where employers generally provide retired employees with lifetime payments — to defined contribution plans such as 401(k)s, according to the Labor Department. Participants in defined contribution plans increased to 67 million in 2007 from 11 million in 1975, the agency said.

The Employee Benefit Research Institute estimates 47 percent of Americans born between 1948 and 1954 may not be able to afford basic expenses and uninsured health-care costs through retirement.


To help, insurers told the Labor and Treasury department officials it should be easier for employers to include annuities in their retirement plans because Americans are at risk of outliving their savings.  Data from Fidelity Investment shows the average age of a retiree purchasing an immediate income annuity is 67, later than experts would recommend.

“This suggests it’s only after retirement that people begin to truly assess and understand their various income needs,” said Elizabeth Heffernan, a vice president at the Boston-based firm at the hearing.

Insurers Press U.S. to Let Employers Offer Annuities in Retirement Plans

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  • It is obvious, Congressional leaders are lost on this issue. In the article is a brief description of some proposed legislation about giving plan participants more information.

    Proposing legislation about how much a defined contribution plan will provide into retirement shows how little the legislative sponsors understand that the risk of loss on plan assets has passed from employers to plan participants. In fact most defined contribution plans have passed the risk of loss away from both the employer and the group down to the individual participant as if they were IRAs.

  • Assuming that immediate annuities issued through qualified retirement plans will provide a higher level of lifetime income, than one purchased outside of the plan (trustee transfer of a lump sum to an insurance carrier) I am for them. Just as I am for tenure payments instead of lump sums from RMs if the numbers are good, because I believe most folks are better off if they have a lifetime income stream.

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