Lifetime Income - DC Plans Come of Age

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Early Summer, 2010

Greetings!

DEFINED CONTRIBUTION PLAN public policy, plan sponsor and product provider focus is shifting to lifetime retirement income solutions. Longevity risk, recession impacted account balances and squandered lump sum payments pose new questions for participants and those who design Defined Contribution plans.

Innovative answers to these questions seem to emerge almost daily. It's become clear that DC income solutions should target changes in both the accumulation and distribution phases.

Social Security (along with the retirement security promise of Medicare) is becoming the only retirement income employees are sure not to outlive.

The Department of Labor and Treasury joint RFI (Request for Information) on Lifetime Income Options drew many hundreds of responses from insurance companies, investment funds, plan providers, consulting firms and more. These wide ranging comments are now being analyzed by the agencies.

We just returned from participating in the Lifetime Income Summit in Washington DC which brought together a representative cross-section of interested stakeholders. The Summit was sponsored by AARP, ASPPA and WISER (Women's Institute for a Secure Retirement). Presentations explored how insurance and financial markets are responding to the challenge of helping retirees manage their income, and what policymakers need to consider to improve the security of retirement income.

Presenters from both the Administration and Congress confirmed the timeliness of the Summit's focus.

Innovative approaches from both the insurance and financial markets will be key to the solutions.

Public policy and legislative changes will be needed to facilitate these solutions for plan administrators and providers.

Key principles are emerging. Lifetime income solutions must:

Be designed to be flexible for individuals
Be easliy understood and well communicated
Not limit the ability of plan sponsors to change service providers
Not increase the costs of sponsoring a DC plan --- administrative, fiduciary, or contribution dollars

Presenters at the Summit recognized that, even where annuities are currently available at retirement as a distribution option, very few individuals select this option. Better education and more choices are needed. New products, such as guranteed minimum withdrawal benefits, deferred annuities and longevity insurance, as well as partial annuitization of retirement benefits, are important steps.

This is an ongoing discussion that will be critically important for all those who sponsor and support DC plans and OF COURSE, for the participants. We urge you to actively follow and join in the conversation.

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Best Regards,

Donna Rhodes Joseph

donna.joseph@rjtadvisors.com

203-542-7260

Pete Tobiason

pete.tobiason@rjtadvisors.com

203-542-7260

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