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Archived News Release--Caution:
information may be out of date.
For more information call: 202/219-8921.
The U.S. Department of Labor will issue guidance on Monday
requiring employers to purchase the safest available annuity contract for
retirement benefits.
"The interpretive bulletin will better assure the
protection of plan participants whose benefits are annuitized," said Olena
Berg, Assistant Secretary of Pension and Welfare Benefits Administration, U.S.
Department of Labor. "Fiduciaries must consider financial soundness, among
other factors, when selecting annuity providers."
The bulletin requires fiduciaries to take steps to find
the safest available annuity unless it is in the interest of the participants
and beneficiaries to do otherwise. The bulletin also indicates that a fiduciary
may conclude, after conducting an appropriate search, that more than one
annuity provider is able to offer the safest available annuity.
The bulletin provides that plan fiduciaries must conduct a
thorough search to identify and select insurers from which to purchase
annuities. The process would include consideration of such factors as:
- the quality and diversification of annuity providers' investment
portfolios;
- the size of the annuity provider relative to the proposed
contract;
- the level of the annuity of the providers' capital and surplus.
Workers often are provided annuity contracts to pay
pension benefits when they leave their jobs or when a plan is terminated. In
the past few years, questions have been raised about the security of annuity
contracts, as best exemplified by the insolvency of Executive Life Insurance
Company of California and New York, a major annuity provider. Worker groups and
the General Accounting Office have recommended that guidance be provided to
help fiduciaries comply with the Employee Retirement Income Security Act
requirements in selecting annuity providers.
The interpretive bulletin is scheduled to be published in
the March 6 Federal Register.
Archived News Release--Caution:
information may be out of date.
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