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Benefits & ERISA Law

: Benefits Biz Blog

DC DB-ification Picking Up Steam

By Nick Curabba et al.

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DC DB-ification Picking Up Steam

Written by: Nick Curabba

It seems to us that there has been more and more attention paid to an issue we have blogged about here -- annuitization from defined contribution plans. As this article from Investment News points out, several of the country's largest insurance companies have rolled out income products within 401(k) plans, and more are sure to follow. While the jury may still be out on how well these particular products fare, one thing seems clear to us: the trend to embrace the "DB-ification" of defined contribution plans is accelerating.

As we have also pointed out, the Investment News article makes the point that portability between plans is, right now, one of the biggest obstacles to more widespread use of annuities inside of a plan. For instance, the issue of making income guarantees "portable" between different plans may be a challenge that many plan sponsors will hesitate to confront. There are solutions to the portability question, one of which involves utilizing a fairly standard practice from the defined benefit world called qualified plan-distributed annuity.

Bob Toth and Bob Kistler of this firm have written a more detailed analysis about the QPDA, which was first published as a Benefit Practice Portfolio in CCH Pension Plan Guide, and republished here with permission.

Full post as published by Benefits Biz Blog on June 17, 2008 (boomark / email).