PWBA Offers Insights on DC Annuity Selection

December 24, 2002 ( - Defined contribution plan sponsors who are making choices about offering annuities as a distribution option should check out some new federal guidance.

The Department of Labor’s Pension and Welfare Benefits Administration (PWBA) has issued Advisory Opinion 2002-14A to “clarify how the existing guidance on selection of annuity providers applies to defined contribution pension plans.”   The PWBA notes that the opinion is designed to offer insights for employers and plan fiduciaries with regard to their specific duties in offering annuities as a distribution option.

Cost “Cut”

The opinion states that fiduciaries may consider costs in evaluating competing annuity products, and further notes that lower costs often mean increased benefits for participants in defined contribution retirement plans.

However, the opinion also makes clear that lower costs alone cannot justify the purchase of unsafe annuities.

Advisory Opinion 2002-14A is available on PWBA’s website at ( ).