September 14, 2010 

Testimony of Janet Boyd, 

Director of Government Relations for The Dow Chemical Company 

on behalf of the American Benefits Council 

Before the Joint Hearing of the Departments of Labor and the Treasury 

On Lifetime Income Products

My name is Janet Boyd and I am the Director of Government Relations – Tax and 

Benefits for The Dow Chemical Company (“Dow” or the “Company”). I am testifying 

today on behalf of the American Benefits Council (the “Council”). My testimony 

focuses on the fiduciary barriers and the disclosure and education needs of lifetime 

income products from the perspective of an employer. 

The Council is a public policy organization representing principally Fortune 500 

companies and other organizations that assist employers of all sizes in providing 

benefits to employees. Collectively, the Council’s members either sponsor directly or 

provide services to retirement and health plans that cover more than 100 million 

Americans. 

I serve on the Council’s Board of Directors and actively participate both directly and 

through the Council in public policy discussions regarding benefits issues confronting 

my company, which is typical of US companies providing retirement benefits to 

employees. 

At the end of 2009, Dow employed approximately 52,000 people worldwide and 

manufactured more than 5,000 products at 214 sites in 37 countries across the globe. 

About 24,000 of Dow’s employees are in the US, and Dow provides retiree benefits to 

more than 100,000 retirees in the US. 

Specifically, Dow provides a range of retirement benefits for its US employees, 

including a defined benefit plan, a 401(k) plan and health benefits. U.S. employees are 

eligible to participate in defined contribution plans by contributing a portion of their 

compensation, which is partially matched by the Company. In general, for the first 2% 
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of base annual compensation that the employee contributes to the Plan, the Company 

will provide a 100% matching contribution. Then, for the next 4% of base annual 

compensation that they contribute to the Plan, the Company will provide a 50% 

matching contribution. 

New Dow employees are automatically enrolled (with an opt out option) in the 401(k) 

Plan within 60 days following their date of hire, and 3% of base annual compensation is 

contributed to the plan as a pre-tax contribution (with Company matches as previously 

described). If the employee fails to designate an investment option, their contributions 

will default to the applicable life cycle fund based on their date of birth. Additionally, 

under the automatic enrollment program, employee contributions are automatically 

increased each year effective April 1 by 1% until the employee reaches a contribution 

rate of 6%. Employees can also voluntarily participate in the automatic increase 

program. Dow’s plan also allows employees the option to make Roth 401(k) 

Contributions and post tax contributions. 

 

Dow allows plan participants to receive distributions in lump sum (which can be rolled 

over to an IRA or other non-Dow eligible pension plan) or they can roll over their 

accounts to the Dow defined benefit pension plan, subject to specified minimum and 

maximum amounts. Such rollover will be converted to an annuity and paid according 

to the terms of the Dow plan. We do not offer any other lifetime income options. 

Dow’s 401(k) plan has approximately 40,000 participants and more than $6.1 billion in 

assets. Approximately 88 percent of our active employee population is enrolled in and 

contributing to the plan. 

Our employees also have access to a defined benefit plan, with most of our employees 

hired before 2008 under a pension equity plan design and the remainder under a more 

traditional cash balance plan design qualified under the Pension Protection Act (PPA). 

In 2009, Dow contributed $355 million to its pension plans. Dow expects to contribute 

$304 million to its pension plans in 2010. Our contributions reflect the strong support 

we receive from our employees for our retirement program, which, as previously 

mentioned, also serves as an access to lifetime income products. Accordingly, we urge 

both the Department of Labor and the Department of Treasury to issue guidance as 

soon as possible under PPA that facilitates account based plans, particularly pension 

equity designed plans. 

Dow continues to evaluate the potential for offering more lifetime income options 

within its 401(k) plan. However, our assessment to date is that the current market is too 

immature to move in that direction anytime soon, and we welcome the development of 

public policies that would facilitate the design of new options that are less complex and 

have lower costs than available today. 
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Fiduciary Concerns

The notice of this hearing requests testimony on the fiduciary safe harbor for selection 

of lifetime income issuers or products, and for plan sponsors desiring to add lifetime 

income products to their plans. As I mentioned previously, Dow has not incorporated 

any lifetime income products to our plans, other than the option to rollover into our 

qualified defined benefit plan. The most significant obstacles to Dow and other Council 

companies are fiduciary concerns. Under current law, the selection of an annuity 

provider is fraught with potential missteps that could result in continued liability for 

the plan sponsor well into the future. To rectify this, plan sponsors need clear, simple 

fiduciary guidance allowing them to make lifetime income options available to plan 

participants without risking a significant increase in potential fiduciary liability. 

Although Department of Labor guidance does make clear that the “safest available 

annuity” standard in Interpretive Bulletin 95-1 does not apply to the selection of an 

annuity contract provider for distributions from a defined contribution plan, the 

guidance requires significant due diligence on the part of plan sponsors without a clear 

“safe harbor”. This due diligence includes an assessment of the annuity provider’s 

continued ability to fulfill its contractual obligations and plan sponsors, including Dow, 

are understandably concerned that courts will make this assessment with the advantage 

of hindsight, resulting in potential litigation liability years later. A clear, simple safe 

harbor is a necessary first step to increase the interest of plan sponsors in adding 

lifetime income options to their plans. 

Many Council companies are starting to focus on lifetime income products that allow 

plan participants to roll over plan benefits into an IRA, with an annuity platform which 

allows the IRA to obtain multiple bids from different insurance companies selling 

annuity products. This isn’t too different from what many plan sponsors, like Dow, do 

now – allow rollovers to a qualified pension plan. However, we would urge DOL to 

provide a safe harbor that would address fiduciary liability concerns that plan sponsors 

currently have if they inform participants about the availability of the annuity platform 

for rollover IRAs, without any endorsement that could imply fiduciary responsibility. 

Specifically, we need clear guidance from the Department indicating the necessary due 

diligence steps (including what types of information should be provided to plan 

participants) that could be taken by plan sponsors to avoid future liability. If plan 

sponsors are encouraged to provide access to such annuity platforms for rollover IRAs 

without becoming subject to fiduciary liability, more plan participants would have 

access to lifetime income products. 

Disclosure and Education

The Council’s companies strongly believe disclosure and education are the first steps 

toward increasing the availability and appropriate use of lifetime income products. The 
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agencies should encourage but not require defined contribution plan sponsors to 

provide illustrations of how account balances translate into lifetime payments at age 65 

by publishing model disclosures which, if used, would not give rise to fiduciary 

liability. The Department of Labor could provide examples in the model (for example, a 

lump sum of X could create an income stream of Y at age 65, providing the relevant 

interest rate and mortality assumptions). The model could also show the variance 

based on different interest rates to avoid employee relations problems whenever 

interest rates decline and future illustrations show lower payments. 

The Council is also a strong proponent of financial literacy education and agrees with 

the agencies that educating participants on the management and spend down of 

retirement assets is a crucial goal as an increasing number of baby boomers approach 

retirement. However, plan sponsors who want to educate their employees on the 

benefits of lifetime income and other management and spend down concepts may be 

deterred by the lack of guidance on how to provide appropriate education in this area 

without triggering fiduciary liability. The Department of Labor’s Interpretive Bulletin 

96-1 which provides detailed guidance on the difference between investment advice 

and investment education, has been very useful for both plan sponsors and 

participants, resulting in increased investment education that otherwise likely would 

not have been provided. Expansion of this interpretive bulletin to cover education on 

the management and spend down of retirement benefits could have a similar effect on 

educating participants on the concepts they will need to know for the retirement phase. 

Similarly, the Council recommends expansion of the Department of Labor’s Advisory 

Opinion commonly known as “SunAmerica” to address computer advice on the spend 

down of retirement benefits. 

Thank you, again, for providing the opportunity for me to present the Council’s 

testimony, from the perspective of a plan sponsor. I welcome any questions you may 

have.