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Statement of 

Tom Roberts 

Chief Counsel, ING Insurance U.S. 

On Behalf Of 

The American Council of Life Insurers 

Before The 

Department of Labor/Department of the Treasury 

Lifetime Income Hearing 

September 15, 2010 
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DOL/Treasury Lifetime Income Hearing 

Introduction 

Good morning. My name is Tom Roberts and I am Chief Counsel at ING 

Insurance U.S., testifying on behalf of the American Council of Life Insurers. We 

appreciate the concerted effort by the Department of Labor, the Treasury and the 

IRS to bring a strong focus to the importance of guaranteed lifetime income. 

These two days of hearings are just one example of your serious dedication to 

these issues. The Request for Information with its 39 questions, and your 

willingness to work through the responses is an even more impressive 

demonstration of your concern. ACLI’s detailed responses to the RFI spoke to 

all of the issues and proposals that are the subject of this hearing. Our testimony 

today will focus on two of these items. 

ACLI and Retirement 

ACLI member companies represent more than 90% of the assets and 

premiums of the US life insurance and annuity industry, and offer insurance 

contracts and other investment products and services to qualified retirement 

plans, including defined benefit pension and 401(k) arrangements, and to 

individuals through individual retirement arrangements (IRAs) or on a 

nonqualified basis. ACLI member companies also are employer sponsors of 
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retirement plans for their own employees. As both providers and employers, we 

agree with you that saving for retirement and managing assets throughout 

retirement are critical economic issues facing Americans and our Nation. 

The life insurance industry protects individuals and families against the 

risk of adverse financial consequences due to premature death, long-term care 

needs and disability, as well as the risk of outliving one’s financial assets or living 

at a substantially reduced standard. ACLI members have many years of 

experience providing the only financial products that feature guaranteed income 

for life. 

Employers have a long history of helping employees understand and 

obtain the insurance and financial protections provided by life insurers. For many 

years, employers have been choosing life insurance companies and making life 

insurance, disability insurance, and retirement plans available through the work 

place. When employers have provided education and information about these 

insurance products, employees have been able to understand these products 

and the workplace has become an important place for individuals to lean about 

insurance products and obtain them. Employers can and should provide the 

same kind of information and education about lifetime income. With some 

additional guidance, employers will find it easier to provide education and 

information and to choose an annuity provider. 
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Obstacles and Areas for Improvement Described 

We support efforts to make it easier for plan sponsors to provide 

information and education about annuities including the illustration of an 

individual account balance as lifetime income. My comments today highlight 

some of the issues and recommendations that the industry submitted in response 

to the Request for Information. Accordingly, I would like to spend this time 

discussing two specific items – 1) the disclosure or illustration of account 

balances as guaranteed monthly income for life and 2) the fiduciary safe harbor 

for selection of lifetime income issuers or products. 

Disclosure of Account Balances as Monthly Income Streams 

Academics write of the “wealth illusion,” an effect of workers seeing their 

savings as a large single sum without understanding its true potential as a source 

of lifetime income throughout retirement. Current law and common plan design 

encourage participants to consider their account balances as single sums 

available for payment upon retirement. This can and often does create a false 

sense of wealth. One major step forward would be to reframe retirement savings 

as a source of lifetime income. 
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The Department of Labor can issue guidance to make it easier for 

employers to appropriately illustrate or demonstrate the guaranteed lifetime 

monthly income that could be provided by a participant’s defined contribution 

plan account. ACLI also supports legislative proposals introduced by Senators 

Bingaman, Isaakson and Kohl, as well as Rep. Kind to include these illustrations 

on benefit statements. ACLI suggests that the illustration be based on a 

participant’s current account balance and the assumption that the participant has 

already reached age 65. 

With this key piece of information, workers can understand the value of 

their savings, decide whether they need to increase their contributions, adjust 

their 401(k) investments or reconsider their retirement date, if necessary, to help 

achieve the quality of life they expect in retirement. Our RFI response included a 

survey that shows most workers felt it would be valuable to see how much 

guaranteed lifetime income they could obtain using their retirement plan savings, 

and that seeing an illustration may prompt them to save more. More specifically, 

the survey showed that: 

• Nearly all -- nine in ten -- respondents said it would be valuable to 

have their employer show them an illustration of how much monthly 

income they could get guaranteed for life based on the value of their 

retirement plan account 
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• A majority -- three out of five -- said that if an illustration showed the 

monthly income generated would not be enough to meet their needs, 

they would start saving more immediately. 

• Separately, eighty-five percent expressed an interest in having this 

information available in their regular retirement statement or on a 

secure website hosted by either their employer or their plan provider. 

To make this work, a lifetime income Illustration would be based on either 

a plan’s existing guaranteed lifetime income product or an “illustration rate” table 

prescribed by the Departments. As for the factors to be used to prepare such a 

table, we would be pleased to work with the Departments on options for interest 

rates and mortality tables that would lead to rates that reasonably represent 

typical annuity rates. 

Illustrations will help educate participants by translating their account 

values into retirement income potential. This information will assist them in 

evaluating such factors as their income needs, savings adequacy, and the 

amount of income currently devoted to retirement savings. It reframes the 

defined contribution plan as a vehicle that not only helps accumulate savings – 

but also can generate retirement income. 

For this to work, it is critical that plan fiduciaries have no liability to provide 

payments in the amount illustrated under these rules. The Department of Labor 

should provide model language that plans may include on statements to make 
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clear that the payment amount is illustrative. Participants should be made aware 

that the benefit shown is for illustrative purposes only. And it should also be kept 

simple. While it may help to tell the participant on a general level whether the 

illustration is based on government tables or current quotes from options 

available under the plan, providing more detailed information regarding 

assumptions, such as the mortality and interest rates used for the illustration rate, 

may not be meaningful and may confuse participants. 

Fiduciary Safe Harbor for Selection of Lifetime Income Issuer or Product 

The Agency should adopt rules and regulations to make it easier for 

employers to select and administer guaranteed lifetime income products. The 

2008 safe harbor for individual account plans was a significant improvement in 

the rules for the selection of annuity providers. However, it has been the 

experience of our member companies that it has not been broadly used. ACLI 

believes that the regulation should be revised to modify or eliminate the 

requirement that fiduciaries make a determination as to whether “an annuity 

provider is financially able to make all future payments under an annuity 

contract.” This standard is difficult to meet in part because it is hard to know how 

to draw this conclusion. A determination regarding future performance is not a 

requirement applied to the selection of other financial protection products. 

Changes can be made to these rules which will make it easier for employers to 

meet their duties while at the same time ensuring a prudent selection. 
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The safe harbor should continue to include the following important criteria that 

the fiduciary: 

• engage in an objective, thorough and analytical search for the purpose of 

identifying and selecting providers from which to purchase annuities; 

• appropriately consider and conclude, at the time of the selection, that the 

cost, including fees and commissions, of the annuity contract is 

reasonable in relation to the benefits and administrative services to be 

provided under such contract; 

• if necessary, consult with an appropriate expert or experts for purposes of 

compliance with the safe harbor provisions. 

However, instead of a determination about the financial ability to make all 

future payments, the safe harbor should require the fiduciary to give 

consideration to the current financial strength and other “quality” aspects of the 

provider. 

We know that the Department has already given serious thought to this issue. 

As you consider our request, it is important to recognize the unique role of state 

insurance departments in oversight of life insurance companies including the 
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imposition of NAIC uniform rules for the establishment of reserves, the valuation 

of assets and liabilities, risk-based capital requirements and required capital. 

The insurance departments conduct routine reviews of the financial strength of 

each insurer and its ability to meet its commitments, and they have a number of 

powers to intervene and protect policy holders. This system of regulation is a 

factor in the consideration of the quality of a provider. In addition, each state has 

comprehensive laws and regulations governing, but not limited to, licensing 

requirements, sales practices, and market conduct regulation, as well as product 

approvals. The primary focus of our state based system of life insurer regulation 

is to see that insurers keep their promises to consumers under any scenario. 

Fiduciaries need clear and effective guidance regarding their plan duties 

when selecting guaranteed lifetime income products. The safe harbor should 

address all such products. ACLI believes that it is critical that the safe harbor be 

revised to become a more effective tool and expects to submit additional 

commentary and suggestions regarding the issue of financial strength and quality 

of the provider. 

Conclusion 

The steps suggested today and in our RFI response will help employers 

offer annuities and also help more employees see their value as a source of 

guaranteed lifetime income in retirement. These changes and other suggestions 
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in our response to the RFI can help increase interest in the use of guaranteed 

lifetime income in defined contribution plans. The RFI was an important step in 

the public policy discussion on retiree income. Workers not only need to save, 

they need the information and tools to manage income in retirement. We look 

forward to working with the Departments of Labor and the Treasury as they take 

steps to address this important matter. 

I want to thank the Agencies again for holding this hearing, and for inviting 

ACLI to testify. The goal of helping Americans achieve personal retirement 

income security is without question our industry’s number one public policy 

priority. I am happy to answer any questions you may have.