The letter was in response to the DoL’s request for public comment about whether it should integrate annuities into the retirement plan legal and regulatory framework. The U.S. Treasury Department was also included in the request for public input.
“A mandate . . . in any fashion would subject plan fiduciaries to potential liabilities, and plans to great expense, for very little or no gain,” ERIC President Mark Ugoretz said in the letter. “Plans would incur substantial costs in evaluating and selecting (lifetime income arrangement (LIA) providers, and in establishing and maintaining the disclosure, communications, processing, and recordkeeping systems that an LIA would require, in return for no additional benefit for the overwhelming majority of plan participants.”
ERIC said the interests of DC plan participants as a whole group will be best served by educating both employers and participants regarding LIAs rather than by imposing an unwelcome mandate on all DC plans. “By educating employers and DC plan participants, the agencies can have a positive influence on plan design, participant perceptions, and ultimately participant behavior, without imposing unnecessary and unproductive costs on DC plans and plan participants,” ERIC’s letter says.
ERIC further urges the agencies to provide a genuine safe harbor for the selection of an annuity provider. In 2008, the DoL issued a regulation providing what the agency characterized as a safe harbor under the duty of prudence for the selection of an annuity provider and contract for benefit distributions from a DC plan.
“The DOL’s purported safe harbor for the selection of an annuity provider offers no such assurance. The regulation is laced with critical undefined terms requiring subjective judgments and that therefore prevent the regulation from providing the compliance certainty that a genuine safe harbor provides,” Ugoretz says.
The ERIC letter is available here.