The federal government is looking for suggestions on how to encourage the use of annuity payouts in defined contribution plans.
In a joint agency RFI published in today's Federal Register, the Treasury and Labor departments expressed concern that defined contribution plans generally make only lump-sum payments available to plan retirees.
The agencies specifically want to know whether some form of “lifetime income distribution” should be required in all defined contribution plans — and whether the annuity payouts should be the plan's required default distribution option.
In addition, the agencies ask for comment on whether DC plan sponsors should be required to provide participants with an annual report on both the size of their account balances and the amount their accrued benefits would pay out in an annuity.
Comments are due May 3, according to the RFI.
In Washington today, Robert Reynolds, president and CEO of Putnam Investments, endorsed requiring retirement plan sponsors to offer federally backed annuity or other “lifetime income” products to plan participants, according to a Putnam news release.
Speaking at a National Institute on Retirement Security conference, Mr. Reynolds also urged federal policymakers to reform the nation’s retirement system to ensure that all American workers have access to a workplace retirement plan. He also called for the creation of a bipartisan commission to come up with a plan to ensure the solvency of the nation’s Social Security system.
“Ensuring the solvency of the Social Security system and extending the workplace savings system to nearly all working Americans, not just half, are the best ways to tackle America’s retirement challenge and raise America’s national confidence,” Mr. Reynolds said in the news release.