THE RETIREMENT INCOME CHALLENGE IN 401(K) PLANS: OVERCOMING LEGAL OBSTACLES
By Fred Reish and Bruce Ashton
Many participants in 401(k) plans would benefit from guaranteed retirement income to protect them from risk factors, such as underestimating how long they will live, overestimating the rate at which they can spend their retirement savings without the risk of running out of funds, investment risks, cognitive impairment risks, and inflation, as well as the seemingly contradictory risk of being too frugal with their retirement savings. Prior to the SECURE Act, perceived fiduciary liability and practical constraints were barriers to the inclusion of guaranteed retirement income contracts in 401(k) plans. The enactment of the SECURE Act, with its fiduciary safe harbor, its expanded distribution option to address portability, and the requirement to educate participants on the retirement income their accounts will provide, has been a significant step in removing those barriers.
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About the Authors
Fred Reish is a partner in the Benefits and Executive Compensation Practice Group of Faegre Drinker Biddle & Reath LLP and is chair of the Financial Services ERISA Team. He is a noted authority on retirement plan products and plan management and regularly consults with plan service providers, including insurance companies, broker-dealers, and registered investment advisers on fiduciary, prohibited transaction, and lifetime income issues. Fred is the author of several books on employee benefits issues; blogs at FredReish.com where he provides updates and insights on the retirement industry for service providers, plan sponsors, and registered investment advisers; is quoted frequently by national media organizations; and regularly addresses industry conferences.
Bruce Ashton is senior counsel in the Benefits and Executive Compensation Practice Group of Faegre Drinker Biddle & Reath LLP, bringing more than 35 years of experience to working with public and private sector clients dealing with the full range of employee benefits matters. He assists plan service providers, including registered investment advisors, recordkeepers, broker-dealers, and insurance companies, in fulfilling their obligations under ERISA. Bruce contributes to the firm’s Broker-Dealer Law blog, which provides practical insights on litigation, regulatory, compliance, and fiduciary issues impacting broker-dealers; is a frequent contributor to various tax and pension publications; and speaks frequently on employee benefits issues at industry conferences.