May 4, 2012 (PLANSPONSOR.com) - The ERISA Industry Committee (ERIC) says it welcomes proposals by the U.S. Treasury Department to remove regulatory barriers to lifetime income options.
ERIC submitted three comment letters offering recommendations addressing the longevity annuity contract regulations, the partial annuity regulations, and the revenue ruling concerning rollovers from defined contribution (DC) plans to defined benefit (DB) plans (see “Treasury Proposals Pave Way for Offering Lifetime Income Options”).
Longevity Annuity Contract Regulations
While ERIC supports efforts to modify existing minimum required distribution rules to better accommodate deferred annuities, it urged the Treasury and Internal Revenue Service (IRS) to revise the proposed penalty for setting aside more than the maximum amount in a qualified longevity annuity contract (QLAC).
“This all-or-nothing approach is unduly draconian ... If this happens, there is no reason to treat the amount set aside up to the limit differently than if excess amounts had not been set aside,” Ugoretz and Ricard said in the letter. Moreover, they contend that the risk of such harsh consequences will make plan sponsors and participants hesitant to offer or purchase QLACs.
Accordingly, ERIC urges that the final regulation should state that if the amount set aside for a QLAC exceeds the maximum permitted by the regulation, then minimum required distribution calculations should take into account only the value attributable to excess premiums.