Qualifying Longevity Annuity Contracts in Retirement Plans - Part 2

Fewer companies offer lifetime pension benefits these days so most Americans don't have a lifetime benefit other than Social Security. Wouldn’t it be nice to help your employees rest easier knowing they can insure against the possibility of outliving their retirement accounts? If you are or your employees are worried about that, adding the QLAC provision to your company retirement plan may be a good idea.worried about retirement? a QLAC may be a good solution

QLAC BASICS

  • The new regulations are effective for contracts purchased on or after July 2, 2014.
  • When issued, the insurance contract must state that it is a QLAC.
  • The QLAC cannot be a variable or indexed contract.

POTENTIAL PITFALLS

This relatively new concept of improving retirement outcomes doesn’t come without potential pitfalls.

  • Benefit paid – As with any annuity product, the benefit provided is determined by the premium paid, and the accumulation of time. Quotes will be individualized.
  • Availability – There are currently only three companies providing QLACs, and they are currently products offered for IRAs only. We expect now that these regulations were released that more companies will bring products to the marketplace.
  • Plan documents – The retirement plan documents must allow for investment in QLACs. At Benefit Resources, our documents already allow for this as an optional selection in the Adoption Agreement.
  • Recordkeeping – Due to the strict contribution limits, the premium payment history must be kept over the lifetime of the contract. One would hope that the provider would track this, but it may end up being the responsibility of the TPA to assist the Plan Sponsor in tracking payments.
  • Fiduciary responsibility – The Plan Sponsor will carry fiduciary responsibility for determining prudence of product provider as with any other investment made available to the participants of the plan.
  • Portability concerns – Some plans may not offer the QLAC investment, so a participant may not have the option of rolling over the contract to a new employer’s plan. They can always roll to IRA given that they can find an IRA custodian to accommodate their request.

SUMMARY

Retirement benefits in general and QLACs in particular are benefits for tomorrow. But as with all retirement planning, these needs have to be addressed today. Are you interested in looking into offering QLACs for your retirement plan? Do your participants express concerns about their retirement funds lasting their lifetime? At Benefit Resources, we want to offer the most options available to our clients, and educate them about their choices. If you would like to discuss QLACs or any other progressive plan design, just click here to contact one of our pension consultants today.

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