Scott Matheson, CFA, CPA
Senior Director | CAPTRUST Consulting Research Group
Over the past two years, the United States Department of Labor and the Department of the Treasury/Internal Revenue Service (IRS) have on several occasions indicated their interest in facilitating the use of lifetime income options, or tools that help participants manage through the distribution phase of retirement, within defined contribution plans.
On February 2nd of this year, the IRS released their first round of guidance in the form of proposed regulations surrounding the purchase of longevity annuities inside both defined contribution plans and individual retirement arrangements (IRAs).
Concurrent with this Treasury release, the President’s Council of Economic Advisors published a report entitled, “Supporting Retirement for American Families.” In addition to describing many of the risks and challenges that threaten a secure retirement, the report advocates a retirees use of annuities. More specifically, the report draws attention to longevity annuities, as they can be a potentially cost effective way to protect retirees from outliving their savings.
In summary, the Treasury/IRS release focuses on minimum distribution rules, disclosure rules and joint and survivor rules as they apply to longevity annuities. Although this guidance clearly does not cover all types of annuities that can be offered in a defined contribution plan, the industry expects additional guidance in the near term and we are encouraged by signals from the Treasury which lead us to believe that the subject of lifetime income will continue to stay in focus. As always, we remain committed to monitoring these and other industry developments and will keep you apprised of our findings and views.