By Cyril Tuohy
The National Association of Insurance and Financial Advisors (NAIFA) has come out in favor of a proposal to list information about lifetime income in retirement statements to help workers link the contribution and distribution phases of their retirement saving.
The Department of Labor is considering comments related to the Lifetime Income Disclosure Act which, proponents say, will give working Americans a much better picture of the assets they need to put away to achieve a particular level of savings and retirement spending.
“We support the department’s efforts to more fully educate plan participates about their retirement accounts and how much lifetime income those accounts might generate,” said NAIFA president Robert O. Smith, in an Aug. 7 letter to Phyllis C. Borzi, assistant secretary in the Employee Benefits Security Administration.
In the Senate, the bill, S-1145, has the backing of senators Johnny Isakson, R-Ga., Christopher Murphy, D-Conn., Tim Scott, R-S.C., Bill Nelson, D-Fla., and Elizabeth Warren, D-Mass. The House bill, H.R. 2171, was introduced by U.S. Rep. Rush Holt, D-N.J., Tom Petri, R-Wis., Ron Kind, D-Wis, and Dave Reichert, R-Wash.
NAIFA has also come out in favor of “broad, robust” safe harbor provisions protecting employers and plan sponsors from liability should workers later turn around and blame their former employers for misleading projections of retirement assets.
Assumptions and calculation methods should be simple and clear, and easily understood by participants, and calculating projections “should not be burdensome to plan sponsors, service providers or record keepers,” Smith said.
NAIFA, the American Council of Life Insurers and the Insured Retirement Institute have backed the bill but the Investment Company Institute, which represents the mutual fund industry, said it has concerns with the two bills because they don’t do enough to disclose the methods used to provide the lifetime income estimates.
Another shortcoming is that the legislation would require plans to deliver estimates based only on the amount of annuity income an account balance would buy, as opposed to what other financial products might buy.
“While annuity-based illustrations may be a reasonable choice for some, this type of illustration should not be singled out and elevated to preferred status by the department,” said David M. Abbey, senior counsel for pension regulation with the ICI, in a letter to the Labor Department.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.
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