OU Law Professor Jonathan Forman testified last week in Washington, D.C., before the U.S. Department of Labor’s Advisory Council on Employee Welfare and Pension Benefit Plans, known as the ERISA Advisory Council.
At the June 19 hearing, Forman addressed the topic, “Lifetime Income Solutions as a Qualified Default Investment Alternative (QDIA) – Focus on Decumulation and Rollovers.” The Council’s statement on this topic is available here.
In his testimony, Forman covered the principal sources of lifetime income, the regulation on annuities in defined contribution plans, and options for reform.
“Longevity risk - the risk of outliving one’s retirement savings - is probably the greatest risk facing current and future retirees,” Forman said.
He noted that over the past few decades, there has been a major shift from traditional defined benefit plans to defined contribution plans.
“Unlike defined benefit plans, defined contribution plans usually make lump-sum or periodic distributions. To be sure, defined contribution plans can offer annuities; however, relatively few plans do, and, in any event, relatively few participants elect those annuity options. For example, in 2017 annuity payments were available to just 12 percent of workers in savings and thrift plans, to just 9 percent of workers in deferred profit-sharing plans, and to just 29 percent of workers in money purchase pension plans.”
Among Forman’s recommendations to the Council was that the U.S. Department of Labor develop a workable safe harbor for plan sponsors to offer annuities and other lifetime income products.
In addition, he suggested that better guidance on the process of selecting qualifying longevity annuity contracts (QLACs) and other deferred income annuities would increase their utilization.
Forman previously testified before the ERISA Advisory Council in 2015. He has also testified before the U.S. Senate Finance Committee, the U.S. House Ways and Means Committee, and the Oklahoma Legislature.
Forman is the Kenneth E. McAfee Centennial Chair in Law at the OU College of Law, where he teaches individual income tax, corporate tax, pension law, nonprofit organizations, and tax procedure.
He is the author of Making America Work (Urban Institute Press, 2006), and he has more than 300 other publications. In addition to his scholarly publications, he has published op-eds in Barron’s, the Dallas Morning News, the Cleveland Plain Dealer, the Washington Times, the Daily Oklahoman, Pensions & Investments, the Journal Record newspaper of Oklahoma City and Tax Notes.
Prior to joining the OU Law faculty in 1985, he served as a tax attorney in all three branches of the federal government.
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