The Government Accountability Office has confirmed what defined contribution consultants and plan sponsors have been saying for years: DC plan sponsors remain reluctant to include lifetime income options that feature annuities because they want more regulatory guidance and protection.
“Without clearer criteria to select an annuity provider, fear of liability may deter plan sponsors from offering annuities,” said the report, issued last month, that examined the Department of Labor's role in guiding plans. “Without some degree of liability relief, plan sponsors may be reluctant to offer a diverse mix of lifetime income options to their participants.”
The GAO recommended the Labor Department clarify the regulatory safe harbor for sponsors for selecting annuity providers. And it suggested the DOL provide “legal relief for plan fiduciaries offering an appropriate mix of annuity and withdrawal options.”
The GAO report said the DOL should modify its instructions to fiduciaries — or issue new guidance — encouraging plan sponsors to use record keepers that have multiple annuity providers on their platform. The DOL also should encourage sponsors to let participants partially annuitize their account balances by allowing them to purchase “the amount of guaranteed lifetime income most appropriate for them,” the report said.
