The SPARK Institute is worried the Department of Labor’s proposed regulations on lifetime income illustrations are too narrowly focused.
The institute says it supports the concept of voluntary lifetime income illustrations being provided to retirement plan participants, but disagrees with forcing companies to offer this information in just one way.
“The institute is concerned that any mandate to furnish illustrations or conditions to a safe harbor that specify or appear to favor particular methodologies and assumptions will become the primary, or possibly the only, way that plan sponsors will be willing to provide such illustrations and planning tools,” it said in a letter to the DOL.
Putnam Investments said much of the same earlier this week.
Larry Goldbrum, general counsel for The SPARK Institute, emphasized that by forcing everyone to do it the same way, participants won’t have access to “more robust information and tools that rely on other reasonable approaches, including some that allow participants to customize their information.”
The institute also expressed concern that the proposal would require service providers to make changes that are inconsistent with best practices and will be burdensome and costly.
Any additional costs would be borne by participants, Goldbrum said.
“We continue to fear that the illustrations might be misinterpreted by participants as either a promise of what their benefits might be or a guarantee of benefits,” Goldbrum said.
Moreover, most plan sponsors, he said, would not be able to furnish illustrations without the help of service providers, but most service providers are unwilling to assume the potential risk and liability that a safe harbor is intended to cover.
The SPARK Institute asked the DOL to extend any safe harbor protection to such service providers.
SPARK represents the interests of a cross-section of retirement plan service providers and investment managers, including banks, mutual fund companies, insurance companies, third-party administrators, trade clearing firms and benefits consultants.