Tag Archives: Annuities

SECURE Act and Guaranteed Income (Part 3)

The introduction to my last two posts, SECURE Act Part 1 and SECURE Act Part 2, explained:

There are two parts of the SECURE Act that I believe will have the greatest impact on my clients: plan sponsors and plan service providers. The first includes the provisions on retirement income, including the safe harbor for selecting a guaranteed income provider, the ability to distribute guaranteed income investments if a plan no longer want to offer those products, and a new requirement to give participants projection of their retirement income. The second impactful part is the authorization of Open MEPs (Multiple Employer Plans), which the law calls “PEPs” (or Pooled Employer Plans). That change will allow financial institutions to sponsor plans that can be adopted by multiple (or even many) unrelated employers, transferring much of the fiduciary responsibility onto the financial institution.

Part 1 discussed the fiduciary safe harbor for selecting an insurance company to provide the guaranteed retirement income products for defined contribution plans (e.g., 401(k) plans). Part 2 covered the common guaranteed products in 401(k) plans under the pre-SECURE Act rules.

This article talks about two practical issues: (1) the need for the guaranteed retirement income products to be on recordkeeping platforms, and (2) the role of plan advisors in helping 401(k) fiduciaries understand and select the insurance company and the product.

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SECURE Act and Guaranteed Income (Part 2)

The introduction to my last post, SECURE Act Part 1, explained:

There are two parts of the SECURE Act that I believe will have the greatest impact on my clients: plan sponsors and plan service providers. The first includes the provisions on retirement income, including the safe harbor for selecting a guaranteed income provider, the ability to distribute guaranteed income investments if a plan no longer want to offer those products, and a new requirement to give participants projection of their retirement income. The second impactful part is the authorization of Open MEPs (Multiple Employer Plans), which the law calls “PEPs” (or Pooled Employer Plans). That change will allow financial institutions to sponsor plans that can be adopted by multiple (or even many) unrelated employers, transferring much of the fiduciary responsibility onto the financial institution.

That post then discussed the fiduciary safe harbor for selecting an insurance company to provide the guaranteed retirement income products for defined contribution plans (e.g., 401(k) plans).

This article talks about the types of guaranteed retirement income products currently found in 401(k) plans. Let me start by addressing two common areas of misunderstanding.

Continue reading SECURE Act and Guaranteed Income (Part 2)

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SECURE Act and Guaranteed Income (Part 1)

There are two parts of the SECURE Act that I believe will have the greatest impact on plan sponsors and service providers.

  • The first part includes the provisions on retirement income, including the safe harbor for selecting a guaranteed income provider, the ability to distribute guaranteed income investments if a plan no longer want to offer those products, and a new requirement to give participants projection of their retirement income.
  • The second impactful part is the authorization of Open MEPs (Multiple Employer Plans), which the law calls “PEPs” (or Pooled Employer Plans). That change will allow plans that can be adopted by multiple unrelated employers, transferring much of the fiduciary responsibility onto the sponsor of the PEP, which could be, g., a financial institution, a recordkeeper or an advisory firm.

This article discusses the fiduciary safe harbor for selecting the provider (e.g., insurance company) for a guaranteed retirement income product. The other provisions will be discussed in future articles.

Continue reading SECURE Act and Guaranteed Income (Part 1)

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The SECURE Act and Guaranteed Retirement Income in Plans

By now you have probably seen a number of articles about the SECURE Act (Setting Every Community Up for Retirement Enhancement Act of 2019) and its safe harbor for guaranteed retirement income in 401(k) plans. Some have favored the safe harbor, while others have criticized it. In either case, the authors appear to contemplate that participants will be buying individual annuities at retail prices.

In my opinion, those articles—on both sides of the fight—are at best misleading and in some cases just plain wrong. I am writing this article to give you my views.

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