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Follow on Google News | Why New Gov’t Policy Is A Green Light For Advisors To Increase Annuity Options In Retirement PlansTorrid Tech breaks down the government financial technobabble, explaining to advisors how new U.S. Department of the Treasury and Internal Revenue Service policy changes allow them to increase their client’s annuities; why consumers should consider
By: Torrid Technologies Designed to expand the use of income annuities in 401(k) plans, the change makes clear that plan sponsors can include deferred income annuities in target date funds used as a default investment Torrid Tech’s Explanation: Many employer-sponsored 401(k) plans offer so-called target date funds as a default investment for participants who do not affirmatively elect a different investment. Target date funds get their name from the fact that their allocation of investments shifts gradually from equities to fixed income as participants approach an intended target retirement year. Torrid Tech’s Explanation: The new guidance or policy provides plan sponsors an additional option to make it easier for employees to consider using lifetime income. Instead of having to devote all of their account balance to annuities, employees use a portion of their savings to purchase guaranteed income for life while retaining other savings in other investments. Torrid Tech’s Explanation: Under the guidance released a few weeks ago, a target date fund may include annuities allowing payments, beginning either immediately after retirement or at a later time, as part of its fixed income investments, even if the funds containing the annuities are limited to employees over a specified age. The guidance makes clear that plans have the option to offer target date funds that include such annuity contracts either as a default or as a regular investment alternative. Torrid Tech’s Explanation: In an accompanying letter, the Department of Labor also confirmed that target date funds serving as default investment alternatives may include annuities among their fixed income investments. The letter also describes how ERISA fiduciary standards can be satisfied when a plan sponsor appoints an investment manager that selects the annuity contracts and annuity provider to pay the lifetime income. Torrid Tech’s Explanation: In July, the Treasury Department and IRS issued final rules on the use of longevity annuities – a type of deferred income annuity that begins at an advanced age – in 401(k) plans and IRAs as part of a broader coordinated effort with the Department of Labor to encourage lifetime income and enhance retirement security. What does this mean for you? The new policy change is another step reflecting the continuing commitment of the Administration to work in a variety of ways to further bolster retirement security and saving. Here are a few action steps to take advantage of the green-light: employers need to immediately look into changing their 401(k) plans to offer these new annuity options their plan advisor needs to determine which annuities to offer and add them to their options employees need to be educated about these new options, their value, and why they should take advantage of these new annuity options everyone involved needs to monitor the plan to see if these new rules are working in practice, instead of in theory Source: http://www.treasury.gov/ About Torrid Technologies Torrid Technologies offers a keep it simple retirement planning tool that allows you to hold onto a strong retirement future, even if the powers that be in Washington try to make a grab for it. You can download a complimentary demo copy from their website at: http://www.torrid- Contact Information: Torrid Technologies 1860 Sandy Plains Rd. Suite 204-129 Marietta, GA 30066 770-884-6085 www.torrid-tech.com miji@torrid- End
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