In this article, Milliman actuary Ian Laverty takes a deep dive into changes stemming from the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and provides additional insight into the new law, particularly as it relates to individual annuity contracts. The changes made by SECURE that open up opportunities for individual annuity carriers relate to two primary topics: fiduciary responsibility and portability.
The SECURE Act has now made it significantly more attractive and less restrictive for employers to offer annuities within their defined contribution (DC) retirement plans. This provision presents a growth opportunity for the annuity industry. In this article, Milliman actuary Ian Laverty highlights those opportunities and provides an overview of the fiduciary and portability changes created by the SECURE Act.
Adding protected lifetime income to an investment portfolio can improve the retirement security of many Americans. Providing fiduciary advisers with holistic tools and products can help them blend annuity- and investment-based income approaches more effectively. In this article, Milliman’s Michelle Richter explores the opportunities and challenges advisers face as the financial services industry moves toward supporting a fiduciary standard of advice in the annuity space.
Recently, a long-term Milliman client sold its family-owned business and sought assistance with purchasing annuities for plan participants in conjunction with the termination of its pension plan. The company was looking for a trusted partner to assist them with the process as well as fiduciary responsibilities. Milliman consultants Mary Leong and Katherine Warren discuss the challenge, solution, and outcome in this case study.
Milliman consultants helped one client prepare a strategic and practical strategy to de-risk their defined benefit (DB) pension plan. The consultants began discussions by explaining how the path to de-risking included a wide spectrum of options ranging from risk retention via modified plan design to third party risk transfer. The advantages and disadvantages including costs associated with several de-risking options were also discussed. The client’s decision would depend on their risk tolerance and willingness to incur additional short-term costs. Milliman’s Zorast Wadia explains how the firm helped the client meet their overall business objective in his case study “De-risking: Options available to reduce your pension plan footprint.”
In a new Bloomberg BNA article, John Ehrhardt discusses the annuity substitution rule retained in Notice 2021-61 by the Internal Revenue Service. The rule will help actuaries value the liabilities for plans that pay lump-sum.
Here is an excerpt:
Because the MAP-21 [Moving Ahead for Progress in the 21st Century] rates apply to calculations for discounting plan liabilities but not to calculations for participant lump-sum amounts, it was unclear how practitioners should use the MAP-21 rates in calculating the present value of future lump-sum payments, Ehrhardt said.
“If the annuity substitution rule [had] not [been] upheld, most of the positive impact of the MAP-21 rates would have been lost for plans that pay lump sums,” he said.