The Treasury and Labor departments will soon be taking steps to make it easier for companies to offer “automatic annuities” in 401(k) plans, Treasury senior adviser Mark Iwry said today.
Federal officials are looking at ways “to make it much more possible, feasible and practical for lifetime income to return to the scene,” Mr. Iwry said at a conference in Washington sponsored by the American Council of Life Insurers.
“The 401(k) defined contribution space seems to be a particularly propitious place to do that,” he added, while addressing conference attendees.
Mr. Iwry — who was appointed to his position in April — has been examining different options for workers to have access to annuities in their employer-sponsored retirement plans.
The Treasury Department is now in the process of issuing guidance for rules that would apply to annuities offered within 401(k) plans, he said.
Specifically, Mr. Iwry noted, Treasury officials are focusing on guidelines surrounding the solvency of insurers that offer annuities on 401(k) platforms, as well as the costs and portability of these lifetime-income vehicles when offered to plan participants.
“In order to make the informed public and opinion leaders comfortable with the idea of lifetime income in (defined contribution) plans, we'll … have to make sure that competition and market forces are bringing the costs into a reasonable zone,” he said.
While many insurance industry officials have called for reducing liabilities on employers who offer annuities as part of 401(k) plans, it will be difficult for the government to lessen an employer's fiduciary responsibility in making prudent selections of annuity carriers, Assistant Labor Secretary Phyllis Borzi stated at the conference.
“It seems very difficult for me to think about how one could construct a safe harbor that would remove the basic duty under ERISA to prudently select and monitor the annuity provider without simply abrogating that responsibility and giving it to the participant,” she said.
Sara Hansard is a reporter with InvestmentNews, a sister publication of Pensions & Investments
