INVESTMENT

COMPANY
“a a INSTITUTE Paul Schott Stevens, PRESIDENT & CEO
1401 H Street, NW, Washington, DC 20005-2148, USA 202/326-5901 FAX: 202/326-5806
202/326-5800 www.ici.org paul.stevens@ici.org

August 16, 2010

Submitted Electronically

Office of Regulations and Interpretations
Employee Benefits Security Administration
Attn: Lifetime Income Joint Hearing
Room N-5655, U.S. Dept. of Labor

200 Constitution Avenue, NW
Washington, DC 20210

Re: Lifetime Income Joint Hearing

Ladies and Gentlemen:

The Investment Company Institute’ requests the opportunity to testify before the Departments of
Labor and Treasury at the joint hearing on lifetime income options on September 14, 2010. The
Institute’s May 3, 2010 response to the Agencies’ Request for Information on lifetime income was
based on extensive research and analysis of the complex issues surrounding retirement income. We
would testify at the hearing on three of the areas the Agencies would like to examine further:

1. Certain specific participant concerns affecting the choice of lifetime income relative to other
options.

2. Information to help participants make choices regarding management and spend down of
retirement benefits.

3. Disclosure of account balances as monthly income streams.

We would provide insight into these areas based on our research in the retirement space and knowledge
of investor/participant preferences regarding disclosure. Many of our individual member companies
will be able to offer valuable testimony based on their own experiences on the issues the Agencies

“The Investment Company Institute is the national association of U.S. investment companies, including mutual funds,
closed-end funds, exchange-traded funds (ETFs), and unit investment trusts (UITs). ICI seeks to encourage adherence to
high ethical standards, promote public understanding, and otherwise advance the interests of funds, their shareholders,
directors, and advisers. Members of ICI manage total assets of $11.18 trillion and serve almost 90 million shareholders.


Office of Regulations and Interpretations
Employee Benefits Security Administration
August 16, 2010

Page 2

identified, including the fiduciary safe harbor for selection of a lifetime income provider and alternative
designs of in-plan and distribution lifetime income options.

Participant concerns affecting choice

The Institute would address participant concerns about inflation risk and lack of, or limits on, death
benefits and other withdrawal options in lifetime income products. These participant concerns may
stem from the mistaken belief that traditional life annuities and self-managed periodic withdrawals are
the only two options that participants have for spending their retirement accounts. We would show
that a continuum of financial products exists, distinguished by varying degrees of protection against the
wide range of risks that retirees face. The distinction berween annuitized and non-annuitized
drawdown strategies has already become somewhat blurred.

Many comments in response to the RFI had a singular focus on the problem of longevity risk and
assumed that more annuitization should be the goal of public policy. But, as the hearing notice
mentioned, participants also worry about inflation, leaving assets for surviving spouses or heirs, and
needing access to retirement assets in emergency situations, among other things. Policy should
recognize that a wide variety of financial products exist, with varying degrees of protection against
longevity and other types of risks, that address the needs and concerns of many retirees. Any new
mandates or incentives for lifetime income should take into account the continuum of products and
strategies to manage and draw-down retirement assets and that different methods can achieve
economically equivalent results. In addition, very few of the RFI comments examined the extent to
which Americans are already annuitized. We believe policymakers should not ignore this when
assessing what influences participant choices at retirement. Our prepared remarks would allocate
approximately four minutes to this topic.

Enhancing participant understanding

Our testimony would focus on what information would help participants make choices regarding
management and spend down of retirement benefits and describe how the government and private-
sector could work together on financial education to develop and deliver information to better prepare
workers for making retirement income decisions both in- and outside of plans. For example, one
component of an education campaign could inform individuals nearing retirement of the benefit of
delaying receipt of Social Security payments, This is an efficient way to increase annuity income,
because Social Security benefit adjustments are approximately actuarially fair (increasing as much as 7
to 8 percent per year). We anticipate allocating approximately three minutes to this topic.


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Employee Benefits Security Administration
August 16, 2010

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Disclosure translating account balances into income streams

Our testimony would cover many of the questions the Agencies pose on disclosing account balances as
monthly income streams. Although we do not support mandating this disclosure or codifying a single
approach to providing the information, we believe the information is useful and many providers,
including Institute members, make this calculation available or show it on participant statements today.
The particular method and specific economic assumptions for calculating an income stream is better
left to the discretion of the plan and its provider, in order to allow competition to develop the most
useful formulation, For reasons we will explain, it would be inappropriate to require disclosure of only
the annuity value of the account balance at the exclusion of other methods when characterizing income
streams, especially if those other methods are easier to explain and convey the same basic principles to
participants, Whatever calculation method is used, information providers should disclose any
assumptions used in the calculation, in light of the obvious uncertainty associated with estimating a
future income stream. We plan to devote approximately three minutes to this topic.

* * *

I would greatly appreciate the opportunity to present the views outlined above and engage in an
important public dialogue at the hearing. We hope the Agencies agree that our participation will be
worthwhile and grant the Institute’s request to testify.

Sincerely,

Paul Schott Stevens
President and CEO