companies. Together, these annuity investments accounted for over 9 percent of IRA
holdings”.

The Savings Coalition believes that it is important for Americans to think through their
retirement income needs when making a decision about distributions. When making these
decisions, people should not only be thoughtful about their needs, but also have access to
educational tools that can help them make the right decision. Distribution options should be
clear about what is covered under each option; the options for each distribution product must be
clearly delineated so people will have the knowledge they need to be able to make the correct
decision for themselves. The costs associated with each option is an important feature that
should be included in any information provided to Americans so that they can better be able to
decide what approach is better for them.

Financial Literacy:

For more than a decade, the Savings Coalition has been actively supportive of financial
literacy efforts; both in the public and private sectors. Every four years, at the national party
conventions, the Savings Coalition and its members sponsor a presentation about how our
organizations are meeting financial literacy needs at various stages of life along with efforts that
are now taking place in the workplace. We know that the financial needs of someone who is 20
are different than the financial needs of someone who is 70. These needs are based on the
individual’s life circumstance and as such, we need to be addressing policy issues in a way that is
flexible to not only meet the needs at various stages of life, but also to allow for any innovation
that will occur in the future. For example, target date retirement funds have become increasingly
prevalent in defined contribution plans over the past decade. Yet, their key features have
become more well-known and understood by the general public since 2006.

Decisions about distribution of retirement account assets need to be made at various
times in an American’s life. For example, when one changes jobs, should his/her retirement
funds be moved to the new workplace account, an IRA or an annuity. Having the correct
information available to the individual at that particular time is critical in making the decision.
The correct information should include all factors to be considered such as fees associated with
each, life expectancy, and the numbers of years when the individual will continue to work are
just a few. Financial literacy is critical as people need to know to ask these questions so that they
can make an informed decision.

Conclusion:

The Savings Coalition appreciates the opportunity to provide comments to the Agencies
lifetime income. The Savings Coalition supports additional efforts to educate Americans about
the range of issues that should be considered as they approach retirement. However, it is very
important to avoid limiting the flexibility of participants or add additional burdens to plan

? See Investment Company Institute, 20/0 Investment Company Fact Book, available at
www.ici.org/pdf/2010_factbook.pdf. These data do not necessarily provide an accurate measure of annuity’
demand by retirees with IRA accounts, because only about 5 percent of deferred annuity contracts are ever
converted to immediate annuities.


believes it will still be working at the traditional retirement age of 67, and four of the five top
reasons given were not financial in nature.”

Individual Retirement Accounts

Congress created the traditional deductible IRA in 1974. Since then new types of IRAs
have evolved and the eligibility and contribution rules have been altered several times. In 1978,
Congress established the Simplified Employee Pension (SEP) IRA — an employer-based IRA.
Between 1982 and 1986, Congress made the traditional IRA “universal” by allowing all workers
under age 70% to make tax-deductible IRA contributions. Beginning in 1987, Congress
eliminated the universality of tax-deductible IRA contributions, but permitted workers meeting
certain income limits to make such contributions even if they were covered by employer-
sponsored retirement plans. In addition, after-tax, or nondeductible, contributions were
permitted. In 1996, Congress added the Savings Incentive Match Plan for Employees (the
SIMPLE IRA); an account targeted to small businesses and also increased the permitted
contribution to spousal IRAs. Congress further expanded the menu of offerings again in 1997
with the Roth IRA and raised the income limits for IRA contribution deductibility. In 2001,
Congress raised contribution limits for IRAs and those provisions permanent in the 2006 Pension
Protection Act.

Today, the IRA successfully fulfills two primary functions. One is to give individuals not
covered by retirement plans at work an opportunity to save for retirement on their own in tax-
deferred accounts. The other is to provide portability for retirement assets by giving retiring
workers or individuals changing jobs a means to preserve employment-based retirement plan
savings by allowing them to transfer, or roll over, plan balances into IRAs. The U.S. workforce
has a very low job tenure rate. The average worker tenure at a particular employer is 4.1 years, as
measured by the Bureau of Labor Statistics.'' For younger workers ages 25-34, average tenure is
lower, 2.7 years. Other surveys show that the average American will hold between 5 — 15 jobs in
a lifetime. The IRA plays a crucial role in consolidating retirement savings for millions of
Americans. The employer plan which is an important savings accumulation tool is not
necessarily the best decumulation tool for most workers, particularly given the dynamics of our
workforce.

IRA Rollovers and Distributions

Distributions from traditional IRAs can be taken at age 59 % without any type of penalty.
In addition, current rules require account holders to take a “minimum distribution” from their
traditional IRA by April 1“ of the year after they turn 70 4. The Savings Coalition believes
that the Agencies should consider the need to update the required age of distribution. Any
changes to the RMD rules for annuity-type products should not give rise to disparate treatment
for other distribution methods, such as periodic withdrawals.

IRA account holders do purchase annuities. According to research from the Investment
Company Institute, “at the end of 2009, IRA assets held at life insurance companies were $303
billion and another $85 billion of IRA assets were held in variable annuities at mutual fund

' Bureau of Labor Statistics, January 2008.


sponsors. Retirement is changing and for more than just financial reasons. As a policy matter,
retirement distribution rules and regulations should provide flexibility, not “one-size fits all”
solutions.

To paraphrase a recent automobile commercial, ‘this is not your father’s retirement.”
The most helpful role for government is to continue efforts to educate Americans and prornote
financial literacy to help individuals make informed decisions about their financial needs.



uaaasprocessng II, = AEG -\4 868] -09F

REGULATIONS
HERON & REG

Page | of 1

APR 3 0 2010

As of: Apri! 30, 2010
Received: April 30, 2010
Status: Posted
PUBLIC SUBMISSION Prostes: sr! 30,2010
Comments Due: May 03, 2010
Submission Type: Web

Docket: IRS-2010-0006
Request for Information Regarding Lifetime Income Options for Participants & Beneficiaries ir

Retirement Plans

Comment On: IRS-2010-0006-0001
Request for Information Regarding Lifetime Income Options for Participants and Beneficiaries in
Retirement Plans

Document: IRS-2010-0006-0071
Comment on FR Doc # 2010-02028

Submitter Information

Name: Kathy Virginia Hamor
Address:
1050 17th Street, NW
Suite 1000
Washington, DC, 20036
Email: khamor@savingscoalition.org
Phone: 202-223-2632
Fax: 202-223-2634
Submitter's Representative: Kathy Hamor
Organization: The Savings Coalition of America

General Comment

Thank you for the opportunity to provide comments regarding lifetime income options for
participants and beneficiaries in retirement plans.

Comments from the Savings Coalition of America are attached.

Attachments

IRS-2010-0006-0071.1: Comment on FR Doc # 2010-02028

https://fdms.erulemaking.net/fdms-web-agency/component/submitterInfoCoverPage?Call=... 4/30/2010


ts
Savin gS AMERICA

April 30, 2010

Ms. Stephanie L. Ward

Internal Revenue Service

US Department of the Treasury

Office of Regulations and Interpretations

Employee Benefits Security Administration (EBSA)
1111 Constitution Avenue, NW

Washington, DC 20224

Re: REG-148681-09
Dear Ms. Ward:

On behalf of its 45 member organizations, the Savings Coalition of America (“Savings
Coalition”) is pleased to submit these comments in response to the request for information (RFI)
by the Employee Benefits Security Administration of the Department of Labor and the Internal
Revenue Service of the Department of the Treasury. The Agencies are seeking comments
regarding the rules under the Employee Retirement Income Security Act (ERISA) and the plan
qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so,
how, the Agencies could or should enhance, by regulation or otherwise, the retirement security
of participants in employer-sponsored retirement plans and in individual retirement arrangements
(IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to
provide a lifetime stream of income after retirement.

The Savings Coalition of America was established in 1991 to support incentives to
increase the level of personal savings in the United States. The Savings Coalition has supported
expansion and simplification of Individual Retirement Account (IRA) provisions and our
comments will focus specifically on the aspects of the RFI which impact IRAs and IRA account
holders.

What Does Retirement in the 21" Century Look Like?

When looking at Americans’ retirements, there are interesting new trends emerging which
veer from the traditional retirements to which we are accustomed. The generation that is
beginning to retire, the baby boom generation whose size is estimated to be 79 million, is not
planning to retire in the same way that preceding generations have. As the largest generation in
USS. history, the baby boomers have influenced much in American culture, business and politics
during the last half of the 20" century and its aging will continue to shape much of the same
during the first half or more of the 21st century. Recent survey data provide a snapshot of how
Americans’ attitudes toward retirement are evolving.

1


The 2006 Merrill Lynch New Retirement Study surveyed individuals of different generations
and employers. The survey revealed “that while many people are actually working in
retirement or have taken steps for a new retirement career, most employers are not on track to
prepare for this phenomenon.” The survey “discovered that 76 percent of all baby boomers had
no intention of seeking a “traditional” retirement.”

This survey shows that Baby Boomer Retirements will be different from those of previous
generations. With the dominance that this generation has had shaping American culture and
business, it is likely that these changes will continue for future generations. Some key findings
of the 2006 Merrill Lynch New Retirement Study include:

. The New “Retirement Career.” The ideal retirement for 71 percent of adults surveyed is to
work in some capacity. In fact, almost half of all adults who do plan to work during retirement do
not plan to ever stop working completely, Among those who expect to work in retirement and
eventually stop, the average tenure of their “retirement career” is over nine years and the average
age at which they stop working completely is over 70.

. Working equals longevity in the New Retirement. Among all of the individuals surveyed, the
most frequently cited reason for working during retirement was to stay mentally and physically
active. As life expectancy increases, both current and future generations of retirees plan to use
their longevity bonus to create a freedom-filled and fulfilling “new retirement.” Concerns about
health insurance and financial realities were also cited.

. Gaining control over debt. Paying down debt was ranked as the single most important thing
to do toward securing a financial future in the coming year (33 percent), followed by saving more
(21 percent). More than half (53 percent) of the individuals surveyed were concerned about the
amount of debt in their households, yet most (63 percent) expected to have less debt when they
retired and expected to be eventually debt-free (74 percent).

. Rejecting pre-retirement rigidity and seeking out new opportunities. When asked about their
ideal work arrangement during retirement, the most popular option was “cycling” between
periods of work and leisure. More than half of the adults surveyed would like to change their line
of work and have already taken steps to plan for this new career by attending classes or training
sessions and researching other careers.

. Working and retired. Those who are in the midst of their “retirement career” are more
satisfied than those who are retired and not working. In addition, working retirees are less likely to
fear not being able to afford healthcare and feel they have less debt.

. Are you ready? Less than one-third of individuals who are not already retired, feel
adequately prepared for their retirement. However, three-quarters of boomers feel healthier, are
more open to taking on new challenges and believe their work prospects are better than when their
parents’ generation turned 60.

. The common denominator. Like their employees, most companies do not believe that the
majority of workers are well prepared for retirement. While the new retirement is on most
company radar screens, the challenges that it brings have not been adequately addressed.

Sun Life Financial released its research, the UnretirementTM Index, in 2008 which showed
similar trends. According to this research, “almost half (48%) of the American workforce