[Federal Register Volume 75, Number 153 (Tuesday, August 10, 2010)]
[Notices]
[Pages 48367-48369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19624]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

DEPARTMENT OF THE TREASURY

Internal Revenue Service


Hearing on Certain Issues Relating to Lifetime Income Options for 
Participants and Beneficiaries in Retirement Plans

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor; Internal Revenue Service, Department of the Treasury.

ACTION: Notice of hearing.

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SUMMARY: Notice is hereby given that the Department of Labor and the 
Department of the Treasury (the ``Agencies'') will hold a joint hearing 
to further consider several specific issues relating to lifetime income 
or other arrangements designed to provide a lifetime stream of income 
after retirement for participants and beneficiaries in retirement 
plans.

DATES: The hearing will be held on September 14, 2010, and, if 
necessary, September 15, 2010, beginning at 9 a.m., EST.

ADDRESSES: The hearing will be held at the U.S. Department of Labor, 
200 Constitution Avenue, NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Stephanie L. Ward or Luisa Grillo-
Chope, Office of Regulations and Interpretations, Employee Benefits 
Security Administration, U.S. Department of Labor, at (202) 693-8500 or 
Peter J. Marks, Office of Division Counsel/Associate Chief Counsel (Tax 
Exempt and Government Entities), Internal Revenue Service, Department 
of the Treasury, at (202) 622-6090. These are not toll-free numbers.

SUPPLEMENTARY INFORMATION: The Agencies published in the Federal 
Register on February 2, 2010 (75 FR 5253), a request for information 
(RFI) regarding whether, and, if so, how, by regulation or otherwise, 
it would be appropriate for them to enhance the retirement security of 
participants in employer-sponsored retirement plans and in individual 
retirement arrangements (IRAs) by facilitating access to, and use of, 
lifetime income or other arrangements designed to provide a lifetime 
stream of income after retirement. The Agencies received approximately 
780 comments in response to the RFI.
    The RFI posed several questions on a broad range of topics designed 
to help the Agencies assess the issues relating to the shift from 
defined benefit plans that offer employees lifetime annuities to 
defined contribution plans that typically distribute retirement savings 
in a lump sum payment. With the continuing trend away from traditional 
defined benefit plans to defined contribution plans and hybrid plans, 
including the associated trend away from annuities toward lump sum 
distributions, employees are not only increasingly responsible for the 
adequacy of their savings at the time of retirement, but also for 
ensuring that their savings last throughout their retirement years and, 
in many cases, the remaining lifetimes of their spouses and dependents.
    Following a careful review of all the comments received in response 
to the RFI, the Agencies have decided to conduct a limited public 
hearing for the purpose of further considering and gathering further 
information on a few discrete issues and proposals raised or presented 
in RFI submissions. In this regard, the scope of the public hearing 
will be limited to testimony and questions relating to the following 
specific issues:
    1. Certain Specific Participant Concerns Affecting the Choice of 
Lifetime Income Relative to Other Options. A number of individuals and 
participant representative groups indicated that many participants who 
are choosing the form in which to

[[Page 48368]]

receive their retirement benefits were reluctant to consider a lifetime 
income option because of their concerns about, among other things, the 
long-term viability of the institution issuing the lifetime income 
product, inflation risk, the fees and complexity associated with some 
lifetime income products, and concerns about a lack of or limits on 
death benefits and withdrawal options. The Agencies are interested in 
hearing testimony on these considerations and concerns, how they are or 
can be addressed in the market or via plan design, and recommendations 
concerning steps policymakers and regulators might take to address 
them.
    2. Information to Help Participants Make Choices Regarding 
Management and Spend Down of Retirement Benefits. The Agencies are 
interested in learning more about the particular types of information 
that would be useful to participants when making their choices about 
how to manage and spend their retirement benefits, and the methods and 
materials by which the information could be provided to participants, 
including what behavioral finance teaches in this regard. Several 
commenters on the RFI recommended that the Department of Labor provide 
guidance on how plan sponsors and service providers can assist 
participants in understanding and preparing for the spend down of 
retirement assets without potential fiduciary liability. For instance, 
one specific question is how the Department of Labor should expand and 
clarify Interpretive Bulletin 96-1 to provide useful spend down 
guidance to be relied upon in providing participants with information 
to help them make better informed retirement income decisions.
    3. Disclosure of Account Balances as Monthly Income Streams. Many 
commenters believe there is a need to make available to participants 
more information on the benefits and value of a lifetime stream of 
income as compared to a lump sum distribution. The Agencies are 
interested in hearing testimony on whether participants in 401(k) and 
other defined contribution plans would be more likely to give due 
consideration to lifetime income stream options if they were furnished 
a benefit statement that, in addition to their account balance, sets 
forth their benefit in the form of a monthly lifetime benefit. If so, 
should such income streams be based on the participant's accrued 
benefit (account balance) as of the date of the statement or based on 
the individual's projected account balance at some future date, such as 
normal retirement age under the plan or social security retirement age, 
and would this information would be more helpful to participants who 
are close to retirement than to younger participants? If the stream of 
payments depicted in the benefit statement is based on an account 
balance projected to some future date (e.g., normal retirement age), 
what contribution rate (e.g., the participant's current contribution 
rate or a specified percentage of current compensation adjusted 
annually) and what rate of return should be assumed during the 
accumulation phase, and what interest rate should be used for 
converting the account balance into an income stream? Alternatively, if 
the stream of payments depicted is based on the participant's current 
account balance converted immediately to payments commencing at a 
future date (e.g., normal retirement age), what interest rate should be 
used for the conversion? In either case, what mortality rates should be 
used? Should the statement explain what actuarial assumptions were used 
in estimating the actuarial equivalent of an account balance in the 
form of a monthly lifetime benefit? Should it quantify or otherwise 
explain any uncertainty associated with the reported monthly income? 
Should the Agencies or another Federal agency create a computer model 
or guidelines that can be accessed for purposes of performing such 
calculations? What administrative costs and burdens should be factored 
in to assessing the merits of either encouraging or requiring 401(k) or 
other defined contribution plan administrators to provide such 
information on an individual benefit statement?
    4. Fiduciary Safe Harbor for Selection of Lifetime Income Issuer or 
Product. A number of commenters recommended that the Department of 
Labor revise the annuity selection safe harbor to provide an objective 
standard that fiduciaries could rely on in selecting and evaluating the 
various lifetime income products. The Department of Labor is interested 
in hearing testimony on what particular changes should be made to the 
fiduciary safe harbor for the selection of annuity providers for the 
purpose of benefit distributions from defined contribution plans in the 
Department of Labor's regulation 29 CFR 2550.404a-4. In this regard, 
should different criteria apply to a fiduciary's decision depending on 
the size of the plan? Should different criteria apply depending on the 
type of lifetime income product? Are there standards that the 
Department of Labor could establish to provide comfort to plan 
fiduciaries regarding the solvency of the provider? Should the safe 
harbor be extended to other lifetime income options?
    5. Alternative Designs of In-Plan and Distribution Lifetime Income 
Options. Several commenters provided information concerning a variety 
of in-plan and distribution lifetime income options, some insured, 
others not. The Agencies are interested in better understanding and 
further exploring those and other approaches to offering streams of 
lifetime income to plan participants, including approaches that are or 
will be available in the marketplace, and related financial, actuarial 
and legal issues.
    The hearing will be held on September 14, 2010, and, if necessary, 
September 15, 2010, beginning at 9 a.m., EST, in the plaza auditorium 
of the U.S. Department of Labor, Frances Perkins Building, at 200 
Constitution Avenue, NW., Washington, DC 20210.
    Persons interested in presenting testimony and answering questions 
at this public hearing on one or more of the five issues specified 
above must submit, by 3:30 p.m., EST, August 16, 2010, the following 
information: (1) A written request to be heard; indicating which of the 
five specified issues the person proposes to address and (2) an outline 
of the main points to be discussed regarding the specified issue or 
issues, indicating the time allocated to each point. It should be noted 
that, while reasonable efforts will be made to accommodate requests to 
testify on the specified issues, it may be necessary to limit the 
number of those testifying in order to adhere to the hearing's format. 
Any persons not afforded an opportunity to testify will nonetheless 
have an opportunity to submit a written statement on the specified 
issues for the record. The hearing will be open to the general public.
    Because the Agencies will jointly review all responses submitted, 
interested parties may send requests and outlines to either Agency and 
need not submit responses to both Agencies . Respondents are encouraged 
to use the title ``Lifetime Income Joint Hearing'' to facilitate the 
organization and distribution of responses between the Agencies. 
Interested parties are invited to submit responses to:
    Employee Benefits Security Administration, U.S. Department of 
Labor: To facilitate the receipt and processing of responses, the 
Department of Labor encourages interested persons to submit their 
requests and outlines electronically by e-mail to [email protected]. 
Persons submitting requests and outlines electronically should not 
submit paper copies. Persons submitting requests and outlines on

[[Page 48369]]

paper should send or deliver their requests and outlines (preferably at 
least three copies) to the Office of Regulations and Interpretations, 
Employee Benefits Security Administration, Attn: Lifetime Income Joint 
Hearing, Room N-5655, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Washington, DC 20210. All requests and outlines submitted 
will be available to the public, without charge, online at http://www.dol.gov/ebsa and at the Public Disclosure Room, N-1513, Employee 
Benefits Security Administration, U.S. Department of Labor, 200 
Constitution Avenue, NW., Washington, DC 20210.
    Internal Revenue Service. Comments to the IRS, identified by REG-
148681-09, by one of the following methods:
     Mail: CC:PA:LPD:PR (REG-148681-09), Room 5205, Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044.
     Hand or courier delivery: Monday through Friday between 
the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-148681-09), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC 20224.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments (IRS REG-148681-09).
    All submissions to the IRS will be open to public inspection and 
copying in room 1621, 1111 Constitution Avenue, NW., Washington, DC 
from 9 a.m. to 4 p.m.
    The Agencies will prepare an agenda indicating the order of 
presentation of oral comments and testimony. In the absence of special 
circumstances, each presenter will be allotted ten (10) minutes in 
which to complete his or her presentation.
    Information about the agenda will be posted on http://www.dol.gov/ebsa and http://www.regulations.gov on or after August 26, 2010, or may 
be obtained by contacting Stephanie L. Ward or Luisa Grillo-Chope, 
Office of Regulations and Interpretations, Employee Benefits Security 
Administration, U.S. Department of Labor, telephone (202) 693-8500. 
This is not a toll-free number.
    Those individuals who make oral comments and testimonies at the 
hearing should be prepared to answer questions regarding their 
information and/or comments.
    Any individuals with disabilities who may need special 
accommodations should notify Stephanie L. Ward or Luisa Grillo-Chope on 
or before August 27, 2010.

Notice of Public Hearing

    Notice is hereby given that a public hearing will be held on 
September 14, 2010, and, if necessary, September 15, 2010, concerning 
issues related to lifetime income options for participants and 
beneficiaries in retirement plans. The hearing will be held beginning 
at 9 a.m. in the plaza auditorium of the U.S. Department of Labor, 
Frances Perkins Building, at 200 Constitution Avenue, NW., Washington, 
DC 20210.

    Signed at Washington, DC, August 4, 2010.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.

    Signed at Washington, DC, August 3, 2010.
Nancy J. Marks,
Division Counsel/Associate Chief Counsel, Tax Exempt and Government 
Entities, Internal Revenue Service, Department of the Treasury.

    Signed at Washington, DC, August 3, 2010.
J. Mark Iwry,
Senior Advisor to the Secretary, Deputy Assistant Secretary for 
Retirement and Health Benefits, Department of the Treasury .
[FR Doc. 2010-19624 Filed 8-9-10; 8:45 am]
BILLING CODE 4510-29-P