Department seeking comments before proposing formal method.
The Labor Department is taking another run at depicting how lifetime-income streams might look to participants in defined-contribution plans.
The regulatory agency today posted an advance notice of proposed rule making, signaling that the department is considering a rule that would require that workers' accumulated benefits be expressed as an estimated lifetime stream of payments and as an account balance.
The announcement will also run in tomorrow's Federal Register, at which time the 60-day clock for public comments will begin ticking.
The DOL is also weighing a rule that would require that the benefits be projected to the retirement date and then converted as an estimated stream of income.
Industry experts and others are invited to send their suggestions to the department on how best to depict workers' savings as a stream of income.
It's not the first time the DOL has solicited comments on translating accrued savings into income. What's different with this latest endeavor, however, is that the department's administrative approach will allow the public to review the agency's thinking and provide comments.
That will be followed by a proposal and an opportunity for further public input, and then a final rule will emerge, according to Bradford P. Campbell, an attorney at Drinker Biddle & Reath LLP, and a former assistant labor secretary at the DOL's Employee Benefits Security Administration. Normally, the department proposes a regulation, takes comments and then comes up with a final rule.
“I'm glad they've taken a deliberate approach that will allow us to have a few rounds of comments,” Mr. Campbell said. “This isn't a method they often use.”
There are still some potential concerns even with this initial announcement, however. For instance, mandating plans to depict workers' savings in the form of income can come with significant implementation costs, Mr. Campbell said.
Over the last three years, Assistant Labor Secretary Phyllis Borzi and the Treasury Department have been weighing the prospect of coming up with guidelines for lifetime-income options. There was a public hearing on the topic in 2010, eventually leading to a proposed guidance package from the Treasury in 2012.
At the time, it proposed encouraging a partial-annuitization option for participants that would give them an alternative to taking either a lump sum or a stream of payments in retirement. The agency also sought to permit retirees to use some of their savings to buy longevity insurance or a deferred-income annuity. Finally, the Treasury proposed clarifying rollover regulations to permit the purchase of annuities and to satisfy spousal-protection rules when 401(k) accumulations are used to buy deferred-income annuities.
