<nobr>May 3, 2010</nobr>

ERIC Offers Recommendations to Government Request on Lifetime Income Options

ERIC News Release
For Immediate Release: May 3, 2010

Washington, D.C. -- The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America's major employers, today submitted comments to the Departments of Labor and Treasury in response to their request for information (RFI) regarding lifetime income options for participants and beneficiaries in retirement plans.

The RFI requested comments on whether the retirement security of participants in employer-sponsored retirement plans and IRAs can be enhanced by facilitating the use of lifetime income or other arrangements designed to provide a lifetime stream of income after retirement.

ERIC commends the Agencies for issuing the RFI, and offers recommendations to enhance the retirement security of participants, while maintaining the Employee Retirement Income Security Act's objectives of encouraging employers to maintain and create retirement plans.

Accordingly, ERIC opposes any requirement that plans offer lifetime income arrangements (LIA) as distribution options. "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.

ERIC's submission warned that "Plans would incur substantial costs in evaluating and selecting 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 believes that 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.

In addition, ERIC explains that a number of major employers would like to raise their employees' awareness of the potential value of annuity contracts and to help their employees to learn more about annuity contracts, but these employers are concerned, however, that any assistance they provide will expose them to fiduciary liability under ERISA.

Ugoretz stresses that "[t]he flood of ERISA litigation in recent years has made many employers reluctant to subject themselves unnecessarily to even a remote risk of fiduciary liability. The costs of defending class action litigation are so substantial that employers do not wish to incur any risk of litigation that is avoidable -- even if they believe that a court would ultimately find that they have done nothing wrong."

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 DOL 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. ERIC contends, however, that the regulation does not provide a genuine safe harbor. "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.

Among ERIC's other recommendations are that the agencies should consider:

• Working with Congress to reform the minimum distribution rules because the complexity of the current rules, together with the draconian 50% penalty tax on any distribution shortfall, discourages employees from accumulating their savings until their later years; and


• Issuing guidance on defined contribution-to-defined benefit transfers to facilitate the efforts of employers that wish to offer participants in their DC plans the opportunity to transfer their DC plan account balances to the employer's DB plan.

A link to ERIC's letter appears below.

###

For more information:
Ted Godbout
Director, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org

________________________________________________________________________________

The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

ERIC Comment Letter on Lifetime Income Options

Back to Previous Page