Release Date: September 11, 2007
U.S. Department of Labor announces rules on selecting annuity providers for benefit distributions from pension plans
Washington – The U.S. Department of Labor today announced an interim final rule that amends Interpretative Bulletin 95-1 to limit the application of the bulletin to the selection of annuity providers for benefit distributions from defined benefit plans.
The department also announced a proposed rule to provide guidance, in the form of a safe harbor, for the selection of annuity providers by fiduciaries for benefit distributions from individual account plans, such as 401(k) plans.
These rules are being issued pursuant to the Pension Protection Act of 2006, which requires the Labor Department to issue regulations clarifying that the selection of an annuity contract as an optional form of distribution from an individual account plan is not subject to the “safest available” standard under Interpretive Bulletin 95-1, but is subject to all otherwise applicable fiduciary standards.
“The new safe harbor rules will help fiduciaries in prudently choosing annuity providers for distributions from their 401(k)-type plans,” said Bradford P. Campbell, assistant secretary of labor for the department’s Employee Benefits Security Administration.
Under the proposed safe harbor, fiduciaries must:
Conduct an objective, thorough and analytical search to identify and select providers.
Consider the need to engage an expert to assist in its evaluation of providers.
Appropriately conclude that the annuity provider would be financially able to make all future payments under the contract, and the cost of the contract is reasonable in relation to the benefits and services to be provided under the contract.
The interim final and proposed rules are to be published in the September 12, 2007, edition of the Federal Register. While the interim final rule will be effective 30 days after publication in the Federal Register, the public is invited to submit written comments on both the interim final and proposed rules. Public comments should be submitted electronically to the U.S. Department of Labor’s Employee Benefits Security Administration at e-ORI@dol.gov or through the federal e-rulemaking portal at www.regulations.gov.
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