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Secretary of Labor Thomas E. Perez

US DEPARTMENT of LABOR: FALL REGULATORY AGENDA 2009

Employee Benefits Security Administration (EBSA)

Topic: Lifetime Income Options for Retirement Plans

EBSA plans to enhance retirement security by reducing the chances that workers will run out of funds during their retirement years, supporting the Secretary's good jobs for everyone policy.

Key Action: Request for Information (RFI)
The Department's EBSA plans to publish an RFI in January 2010 to solicit views, suggestions and comments from the public on how to enhance retirement security for all workers by reducing the chances that workers will run out of funds during their retirement years. The RFI asks 37 specific questions designed to obtain focused commentary to help EBSA make its determinations.

Key Concern and Issues to be Addressed:
An ever increasing number of workers are looking to their defined contribution plans for their retirement security, but at the same time many workers are receiving their retirement benefits in lump sum distributions. This could increase the risk of running out of money after retirement.

The Department, in conjunction with the Department of the Treasury, anticipates publishing an RFI in January 2010 as a first step towards exploring what steps it can take to enhance retirement security and reduce the chances that workers will run out of funds during their retirement years.

Background
Traditionally, retirement security was provided to many workers through defined benefit pension plans sponsored by their employers because such plans are typically required to make annuities available to participants at retirement.Department of Labor data, however, show a trend away from employer sponsorship of defined benefit plans, toward sponsorship of defined contribution plans, e.g., 401(k) plans.

  • The number of active participants in defined benefit plans fell from about 27 million in 1975 to approximately 20 million in 2006.
  • By contrast, the number of active participants in defined contribution plans increased from about 11 million in 1975 to 66 million in 2006.

The result of these trends is that employees rather than employers are increasingly responsible for the adequacy of their retirement savings. In addition, because defined contribution plans typically distribute retirement savings in a lump sum payment, employees are also responsible for ensuring that their savings last throughout their retirement.

Specifically, the Agencies are exploring whether and how to enhance retirement security for employees in defined contribution plans by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement.