Another Path for Annuities In 401(k)s Emerges

<b></b>Copyright 2008 Euromoney Institutional Investor PLCAll Rights Reserved Defined Contribution & Savings Plan Alert <br> <br> <b></b><span id="x_hitDiv1"><b>June</b> 30, 2008 <br> <br> <b>LENGTH: </b>301 words <br> <br> <br> <b>HEADLINE: </b>Another Path for Annuities In 401(k)s Emerges<br> <br> <p></p> A way to create in-plan defined contribution annuities ­ one used originally as a means to give beneficiaries their assets when DB plans were closed ­ may take hold, pension lawyers predict. Right now, the little used "qualified plan distribution annuity" (QPDA) does not have the detailed regulatory guidance found elsewhere in the law for 401(k) plans. But some lawyers predict a growing interest in using this type of annuity contract in 401(k) plans will spur regulatory activity to answer the questions that QPDAs raise in the DC context. <p></p> One of the biggest unanswered questions, says Robert Toth of Baker and Daniels, is whether a worker can borrow money from his QPDA annuity. It seems as though it should be legally permitted to do so but there are no regulations to say so. Likewise, theoretically, a worker could take out a QPDA as part of a 401(k) distribution from his first employer and keep adding to it as he moves from job to job. But so far, said Toth, the government has not spelled out the steps needed to do that. <p></p> Employers are known to be looking at the QPDA as an option to give workers a lifetime income stream. One hurdle facing annuity providers to the DC market is portability. If a worker takes part of his distribution in the form of a QPDA annuity contract with an insurer, the relationship he has going forward is with the insurer. The transaction is tax exempt. The worker does not have to choose between lump sum and annuity. He can split his assets between the two. Furthermore, the Treasury Department's new 403(b) plan regulations for the first time permit employers to terminate a 403(b) and distribute its assets in the form of "fully paid individual insurance annuity contracts." Lawyers see this aspect of Treasury's 403(b) regulations pushing more use of the QPDA format. <br> <br> <b>LOAD-DATE: </b>July 14, 2008 <br> <br> <div> <div class="x_nshr"> <center></center> <center><a href="http://www.lexis-nexis.com/lncc/about/copyrt.html" target="_new" class="x_pagelinks">Copyright © 2008 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. </a><br> <a href="http://www.lexis-nexis.com/terms/general" target="_new" class="x_pagelinks">Terms and Conditions</a> <a href="http://www.lexis-nexis.com/terms/privacy" target="_new" class="x_pagelinks"> Privacy Policy</a> <br> </center> </div> </div> </span>