May 3, 2010 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

RIN 1545-BJ04 

DEPARTMENT OF LABOR 

Employee Benefits Security Administration 

29 CFR Parts 2509, 2520 and 2550 

RE: Request for Information Regarding Lifetime Income Options for Participants and 

Beneficiaries in Retirement Plans (RIN 1210-AB33) 

Dear Department of Labor and Treasury personnel, 

I am an independent actuary who has focused on developing improved financial products 

and services for seniors for the last 20+ years of a 45+-year career. My CV is attached for 

more particulars. 

I am pleased that you are addressing the complex questions of lifetime income options for 

the retirement security of people with qualified retirement plans. As you are clearly aware 

as shown by the thoughtfulness and thoroughness of your statements, sightings, and 

questions, there is much evidence that people are at-risk as to financial readiness for 

retirement – both as to a) the adequacy of their funds and b) managing their funds and the 

less-forgiving financial risks present in retirement. And yet how the government might 

help is complicated. 

I would like to address a few areas where I think I bring unique perspective. 

1. Life contingent annuities

I hold patent # 5,893,071, Annuity value software, that unbundles life contingent 

payout annuities to give insight into what they are all about – that they are like any 

other savings or investment account where money is deposited with a financial 

institution; credited by the financial institution with interest or investment earnings; 

and any monies paid out, in this case the annuity payments, are debited against the 

account balance. In the life contingent annuity case, there is another regular credit to 

the account, commonly called “mortality credits” where discussed such as by Moshe 

Milevsky, in, among his many other thoughtful writings, his Grandma’s Longevity 
Insurance example and by New York Life in their leading sales of immediate 

annuities. I prefer to call them “Living Credits”. 

These living credits represents the insurance tradeoff embedded in life contingent 

annuities. This tradeoff involves the owners of these annuities forgoing a death 

benefit of the (behind the scenes) account value when the annuitant dies in exchange 

for receiving this living credit every year the annuitant lives. The calculation of the 

annuity payout amount takes this tradeoff into account, thus increasing the payout 

amounts insurance companies pay on life contingent annuities. This depiction of how 

a life contingency payout annuities works thus looks like the following: 

This living credit “leverage” is not discussed in almost all life contingent annuity 

sales presentations, either because it is not well understood even in the life insurance 

industry or it is felt to be too complicated compared to the simple – I’d say simplistic 

– presentation of: for this amount of purchase payment we’ll pay you $X for as long 

as you live, often quoting the $X as an attractive Y% of the purchase payment, not 

even mentioning that the Y% includes amortization of purchase payments. 

The point is, a major reason many people don’t buy life contingent annuities is 

because it is felt to be a bet against the insurance company, that you only win if you 

live a long time, and buyers remorse fear of loss on earlier death sets in big time. This 

is more fully developed in Behavioral Obstacles to the Annuity Market. If, 

alternatively, people were shown how annuities work - and that they enable all 

annuitants to safely draw more income than other means, and why – Framing and 

Annuities suggests that many more would buy them. 

Most importantly to this RFI, if retirees – particularly the so many who are short on 

the means of generating income in retirement - were made aware of this leverage, it 

Begin Living Income End of Year

Age Acct Value Interest Credits Payout Acct Value

70 $100,000 $5,000 $1,814 $9,925 $96,888

71 $96,888 $4,844 $1,959 $9,925 $93,766

80 $68,945 $3,447 $3,494 $9,925 $65,960

90 $42,150 $2,107 $5,594 $9,925 $39,925

100 $22,670 $1,134 $6,943 $9,925 $20,821

110 $5,649 $282 $8,328 $9,925 $4,334

114 $994 $50 $9,354 $9,925 $473

115 $473 $24 $9,429 $9,925 $0

The illustration is of a life only payout annuity to a male age 70, assuming for simplicity that the 

pricing is based on 5% interest and the 2000 Annuity Mortality Table, and results in a payout rate of 

$9 925 payable annually for a $100 000 purchase payment
would help them look more favorably and knowledgeably about using this 

instruments to improve the level of their income as well as the assurance of it lasting 

for as long as they lived. It is therefore suggested that this approach be considered for 

incorporation into programs featuring these products. 

2. Mandated guaranteed lifetime income or other products

That said, I do not advocate mandating life contingent annuity products, or even 

variations such as temporizing ones to let people try them for a couple of year and 

then opt out, or any products for that matter, to further push people to provide a 

guaranteed lifetime income floor of protection from their qualified plans. 

Social Security and other governmental programs already provide a floor of lifetime 

income under the 3-legged stool concept. Seemingly the government might push that 

floor higher by promulgating a certain percentage of qualified plan assets be 

annuitized, even on a sliding scale, perhaps to keep parity with the balances 

“anticipated” under defined benefit pension plans or projections of eventual increased 

reliance on government welfare programs resulting from people underfunding/managing retirement. I am just completing a major research paper for the 

Society of Actuaries on the Implications of the Perceptions of Post Retirement Risk 

for the Life Insurance Industry which suggests that the latter is not a significant risk 

because people gradually, albeit reluctantly and to a degree late, adjust their standards 

of living at higher than dependency levels, viz increases in savings during periods of 

recession. As to the former, even if parity with defined benefit plans could be 

established, intrusion into people’s feeling that defined contribution plans are nest egg 

cash plans, would raise serious resistance, particularly where such plans were in fact 

not intended to be retirement income plans. 

Moreover, there are too many variations in individuals’ situations (e.g., health, other 

assets, degree of income sufficiency, gender, age at retirement, dependent and legacy 

needs, etc.), and too many complex variables that evolve over the potentially fairly 

long period in retirement, to be fair in mandating a single or even package of 

products. 

3. Long-term care financial planning and management 

I have developed an at-need for long-term care annuity that is discussed in a paper I 

recently authored - Home Equity and At-Need Annuities–A Dynamic Long-Term 

Care Funding Duo, for a Society of Actuaries Monograph. It presents some thoughts 

for long-term care funding and the use of home equity, both of which are key areas 

that also need to be addressed as part of considerations for lifetime income. The 

Implications paper mentioned above concludes that a key part of post-retirement 

planning needs to integrate these elements into the process, and that in so doing, longterm care funding might be better looked at as multi-tiered, including the Community 

Living Assistance Services and Supports program (CLASS) portion of the Patient 

Protection and Affordable Care Act (PPACA). 
4. Education

That said, but given the un-readiness of people for retirement, what more might the 

DOL and Treasury do to complement its work to date in the pre-retirement arena? 

As implied by many of your questions and by my discussion above, a major portion 

of the problem and challenge is motivation and education about a too remote and 

complex target, especially within the framework of for the most part a consumerdriven America. 

To a degree, motivation is a function of education about personal consequences and 

balancing priorities. How does one get a 35 year old to prioritize attention to 

retirement many years away, let alone saving for it compared to many other pressing 

shorter-term priorities? 

Some rules-of-thumb such as automatic savings, diversification, rebalancing, and 

risk-reduction nearing retirement, and matching and nearing-retirement catch-up 

programs seem to help in the accumulation stage. Similar rules of thumb would be 

useful for the at- and in-retirement decumulation stage, albeit there is more 

individualization needed, some of the science is just evolving, there is more risk of 

ultimate failure involved, and there have been restrictions placed on the free market. 

Nonetheless, rules-of-thumb introduced to even the 35 year-old, such as is implied by 

your annual statement educational content questions 21-24, would seem useful but 

need to be carefully thought out. For instance, if benefit statement balances are 

characterized by potential income produced by COLA life contingent annuities, to 

what degree do they need to be qualified in that not only might rates change, but that 

most people don’t choose them. Similarly, if the 4% withdrawal rule were used, to 

what degree would it need to be qualified as to failure rates and the need to be at least 

50% in equities, again something that not all retirees will invest in. Should both, 

and/or other approaches such as just living off of dividends and interest, be used? 

My own take n this is that there is a need for education, albeit there is evidence that 

available even free education is mostly not pursued. The problem is there is too much 

education out there, most of it inadequate in many dimensions. It would seem that an 

interesting, involving, well thought out government provided educator, along the lines 

but well beyond that provided by the Social Security Administration would be of 

much use in these respects. The DOL’s Taking the Mystery Out of Retirement 

Planning project was a step in this direction, albeit it, as do many calculators, was 

focused on providing a simple solution rather than on educating about the many 

elements involved. 

I am working on a multi-level Post-Retirement Financial Planning Educator site, 

backed by a financial planning software program, including the use of stochastic 

mortality, morbidity, inflation, and investment, developed by a major consulting firm 

that is more sophisticated than any used in the market. The Educator aims to 

inexpensively help people simply (yes simply, even with all of that stochastic stuff), 

interestingly, and interactively explore, self-educate, and self-plan to the extent users 
feel comfortable, including concepts such as what does a 60/40% equity/bond 

portfolio; or the 4% withdrawal rule of thumb; or a life contingent payout annuity; 

mean and do for them. If they want help going deeper, top notch inexpensive hourly 

fee-based planners will be available to help them with their planning. 

I am open to collaborating on this Educator project to the extent desired. 

I hope these comments to this point are helpful and look forward to any way I can be of 

more detailed help.. 

 Steve Cooperstein, FSA

President & Actuary 

Steve Cooperstein & Affiliates 

310 Locust Street 

Pacific Grove, CA 93950 

831 655-8670 

http://www.innovatingbeyondthe9dots.com

http://twitter.com/stevec360
CURRICULUM VITAE OF STEVE P. COOPERSTEIN 

Office: 310 Locust Street, Pacific Grove, CA 93950 

831 655-8670; 831 648-0437 (fax); SC@IS4Life.com

http://www.innovatingbeyondthe9dots.com 

Steve Cooperstein & Affiliates 

1991-Present 

Entrepreneurial creation, development, and consulting on new concepts to the financial 

services industry, primarily focused on the senior market. Major efforts include a highly 

impaired annuity for people already receiving long term care; a patented unbundled 

payout annuity; hedging minimum guarantees on variable annuity products; an efficient 

COLA payout annuity; multi-level financial planning for the payout stage; development of a 

corporate-owned life insurance grouping mechanism; a new life settlement market, and 

long term care insurance innovations for companies such as AXA, Golden Rule, Allianz, 

Hartford, Aegon, & Ohio National. 

Assisted attorneys in expert witness matters including annuities certain, indexed annuities, 

and the basis for excess interest declarations on fixed deferred annuities. 

Helped implement changes in Minimum Required Distribution Rules. Developed current 

and projected mortality table for payout annuities. 

Recently authored a paper for a Society of Actuaries Monograph at 

http://www.soa.org/library/monographs/finance/housing-wealth/2009/september/mono2009-mfi09-toc.aspx and writing a significant research paper for the Society of Actuaries 

on the "Implications of the Perceptions of Post Retirement Risk for the Life Insurance 

Industry" at http://www.soa.org/research/other-research-projects/proposalrequests/research-imp-post-retire.aspx .

Deloitte and Touche 

1990-1991 

Developed customer-based marketing programs. Created targeted and broadened 

products and services, e.g. long term care type coverage for mid-aged people and refunneling of charitable contributions; building company/customer relationships to 

complement agency activity; and market and agency computer modeling and Expert 

Systems. Participated in company audits and the development of an internal financial 

management system. Developed Universal Life pricing for a NY subsidiary of a national 

insurance company. 

Steve Cooperstein & Affiliates 

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1982-1990 

Marketing and strategic planning consulting and entrepreneurial joint ventures. Expanded 

financial service product, including Expert Systems applications. Developed a fund-raising 

plan, while raising funds, for a non-profit. Established and ran a charitable financial 

planning and marketing business in a joint venture with Monarch Life Insurance Company. 

Developed innovative deferred giving programs involving charitable remainder and lead 

trusts, gift annuities, and life insurance. Performed charitable financial planning for two 

dozen donors. Helped plan major computer enhancements for Equitable Life Assurance 

Company's product development process. On retainer to Monarch Life, developed 

programs for direct response and pension marketing of variable life insurance. Worked 

with sales agency of Penn Mutual to create, broker, and sell new insurance programs. 

Metropolitan Life Insurance Company 

1962-1982 

Developed strategic insurance marketing plans as Vice President, Long Range Strategic 

Market Planning. (1962-1982) 

Managerial and staff positions in all aspects of personal insurance actuarial work. (1962-

1979 - Officer in 1970) 

Management accomplishments

• Revitalized 100-person semi-technical operation. 

• Reorganized and reoriented 500 person/4 unit administrative departments 

• Led department in many management functions such as personnel evaluation, 

motivation, and action, budgeting, planning, conference development, social 

activities, and manpower planning. 

• Liaison between Actuarial and Marketing, Computer, Personnel, Accounting, Legal, 

and Administration. 

Staff accomplishments

• Created a number of innovative insurance products. 

• Made company price competitive. 

• Spearheaded an extensive overhaul of a major line of business's expense position. 

• Instituted new interdepartmental financial controls. 

• Developed system for assessing and communicating financial impacts for executive 

understanding. 

• Established special tax saving liabilities. 

• Developed several new computer systems for modeling the company's financial 

affairs. 

• Creative computer programming early in career. 

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EDUCATION AND PROFESSIONAL EXPERIENCE

• Member of Committee on Post-Retirement Risks & Needs of the Society of 

Actuaries (2004 – Present) 

• Member of the Retirement Income Industry Association (RIIA) (2008 – Present) 

• Member of Project Oversight Group of the Society of Actuaries on Consumer 

Profiles (2008) 

• Member of Project Oversight Group of the Society of Actuaries on Retirement 

Spending (2008) 

• Member of Project Oversight Group of the Society of Actuaries for the Personal 

Actuary (2006 – Present) 

• Member of Personal Actuary Task Force of the Society of Actuaries (2006 – 

Present) 

• Member of Project Oversight Group of the Society of Actuaries on a Transferring 

the Financial Risks in Retirement Program (2005) 

• Chaired Product Subcommittee which created multiple sessions for annual LIMRA, 

LOMA, SOA Retirement Industry Conferences (2005 – Present) 

• Member of Nontraditional Marketing Section Council of Society of Actuaries (2000-

2004) 

• Member of Technology Committee of the Society of Actuaries (2000-2003) 

• President of the Actuaries Club of New York (1982). 

• Member of the Academy of Actuaries (1968). 

• Fellow of the Society of Actuaries (1966). 

• B.S. in Mathematics from Queens College (1962). 

• Graduate of Bronx High School of Science (1958) 

. 

• Participated in many professional activities, including panel discussions, 

workshops, writing articles, and committees, some of which included: Panelist and 

moderator at sessions of Retirement Industry Conference (2005, 2006, 2007); 

Article in the National Underwriter on GLWB’s (1/1/2007); Article in the National 

Underwriter on Impaired annuities (2003); Panelist on Patents at SoA meeting 

(2000); Nontraditional Marketing Newsletter (1997) and the Actuary (1974). 

Member of ACLI Actuarial Taskforce on Dynamic Valuation (1977-78); Discussion 

paper on Sternheil paper on Variable Life (1974) Panelist at Record Of Society Of 

Actuaries, 1986 Vol, 12 No. 2, Actuaries In Non-Traditional Roles; Comments at 

Record Of Society Of Actuaries,1983 Vol. 9 No. 4, Agency Strategies For 

Marketing Success 

• Licensed to sell insurance and registered to sell certain securities. 

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