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WASHINGTON—The Department of Labor and the Treasury Department have put out a request for information on the use of annuities in defined-contribution plans.
Both agencies are reviewing the Employee Retirement Income Security Act of 1974, as well as the plan qualification rules in the Internal Revenue Code, on using annuities in retirement plans. The agencies filed a request for information, which was published in the Feb. 2 issue of the Federal Register.
Specifically, the Labor Department and Treasury want to know the advantages and disadvantages of receiving retirement benefits in the form of incremental payments. They also seek an explanation for why most retirees, when faced with a choice of a lifetime income option or a lump-sum distribution, choose the lump-sum option.
The agencies also want to know what information 401(k) participants need in order to make informed choices on whether they should choose a lifetime income option, and how that information should be provided.
The request comes just as interest in the use of such investments in 401(k) plans is rising in Washington.
A fact sheet released last week by President Barack Obama’s Middle Class Task Force said the administration would promote “the availability of annuities and other forms of guaranteed lifetime income, which transform savings into guaranteed future income, reducing the risks that retirees will outlive their savings.”
The American Council of Life Insurers in Washington cheered the Labor Department and Treasury for considering the role annuities can play in retirement plans.
“The ACLI supports policies that both encourage employers to offer annuities in their retirement savings plans and encourage employees to recognize the importance of receiving a guaranteed lifetime income in retirement,” Frank Keating, the ACLI’s president and chief executive, said in a statement. “We look forward to responding to the departments’ request for information.”
Darla Mercado is a writer for InvestmentNews, a sister publication of Business Insurance.