Key Obama administration executives are distancing themselves from a proposal requiring employer-sponsored retirement plans to offer an annuity payout option.
“I prefer focusing on education, helping people understand the options they have,” Phyllis Borzi, assistant secretary of labor for the Employee Benefits Security Administration, said in an interview during a recess at a Sept 14 hearing on lifetime income options. The hearing was sponsored by the Department of Labor and the Department of Treasury in Washington.
Employers and the public had stridently opposed the idea.
In his opening remarks at the hearing, Mark Iwry, deputy assistant secretary of treasury for retirement and health policy, said: “We're here to consider whether and how we might increase people's choices, not limit them.
Ms. Borzi made clear in the interview that as far as she is concerned, an annuity payout option requirement should be considered only as a ”last resort, after every voluntary thing we could consider.”
“We would like to work with the private sector to see how we can best encourage people to offer some form of lifetime income stream as an option,” Ms. Borzi said.
Mr. Iwry said the Obama administration's inquiry on annuities was not aimed at requiring “purchase of annuities.” But in a follow-up interview, he declined to comment on whether a mandate requiring plan sponsors to offer an annuity payout option was off the table.
The DOL and Treasury originally broached the question of whether “some form of lifetime income distribution option” should be required for defined contribution plans in a joint request for information on Feb. 2.
The concept was either panned or received coolly by key employer and insurance groups.
“ERIC opposes any requirement that DC plans offer (lifetime income arrangements) distribution options,” the Washington-based ERISA Industry Committee said May 3 in written comments to the Labor Department.
Written comments to the DOL from the Committee on Investment of Employee Benefit Assets, Bethesda, Md., said: “It would be imprudent to assume that all DC plans are appropriate vehicles for lifetime income to participants.”
“The consideration of any new plan requirement should be pursued with caution,” the American Council of Life Insurers, Washington, said in its DOL comments.