Steve Cooperstein & Affiliates 

310 Locust Street Telephone: 831 655-8670 

Pacific Grove, CA 93950 Facsimile: 831 648-0437 

E-mail: sc@is4life.com 

September 9, 2010

Peter J. Marks 

Office of Division Counsel/Associate Chief Counsel 

Internal Revenue Service 

Department of the Treasury 

Re: Lifetime Income Joint Hearing 

Dear Mr. Marks, 

As discussed on the phone, I was on vacation the first 2 weeks in August and missed the Notice 

of this hearing and the opportunity to testify at it. Given the questions and having skimmed 

through the outlines submitted, I, perhaps too egotistically because there are some very fine 

people and companies offering their experience and perspectives, feel a dearth of creative 

problem solving is being offered and want to throw my hopefully 3 cents into the hopper. I 

appreciate your being open to my submitting these views even at this date and circulating them 

to the degree practicable and appropriate. 

That said, I just re-read my May 3, 2010 submission to the RFI (# 685 of the RFI postings, 

attached for convenient reference), and find that it says most of what I see missing from the 

prospective testimony. Nevertheless I’d like to restate the crux of my submission and add a few 

additional thoughts in the context of your Questions 1, 2 and 3 (they also have applicability to 

Questions 5). 

Question 1: In terms of allaying people’s fears about immediate annuities, I suggest a more 

fundamental presentation of how they work so that potential buyers (and advisors) can better 

appreciate and evaluate their pros and cons for their situations. My perspective is that “simple” 

black box approach is scary, and the frills offered to overcome fears and erroneous intuitions just 

add more question marks. 

Please note that when one works with the open design suggested, many other logical choices 

such as indexing interest credits to market or choosing death benefit or access choices, unfold. 

Please also note that this fundamental description might be offered even in the context of 

current product designs; in fact I have come to recently understand it is being successfully 

employed by New York Life in its industry leading sales efforts. 

I also want to comment on other guaranteed lifetime products such as Guaranteed for Life 

Withdrawal Benefit riders to deferred annuities (GLWB) and Stand-Alone Living Benefits (SALB) 

to mutual funds. They essentially provide a guaranteed income for life hedge against market 

loss, nicely packaged to calm loss aversion while promoting the allure of equity gains. However, 

as discussed in my 1/1/07 National Underwriter magazine article “Are GLWBs All They’re Cracked 

Up To Be?”, these guarantees carry a not insignificant cost and do not incorporate the mortality 

credit leverage, making them poor choices for those looking for income in retirement. 

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Question 2: In #4. Education, I discuss a Post-Retirement Financial Planning Educator site I am 

looking to develop. Note that it focuses on education, rather than the “solutions” offered by 

calculators, and addresses the varied and varying risks encountered in retirement more robustly 

than the financial planning provided to date by even the best of planners. Most importantly, it 

addresses the overall question more interestingly than heretofore, potentially sparking people to 

be interested enough to undertake self-evaluating interactive 101 understanding of the concepts 

involved. 

If such a site were offered by the Department of Labor directly to employees it would also 

centralize education, allay people’s confusion as to the vast amount of information “out there”, 

and take much of the burden off of employers. 

Question #3: This is a most important feature of your initiative in educating people as to 

retirement planning in the context of Defined Contribution and saving for retirement in general. 

In addition to the points I make at the beginning of my discussion of education, I’d like to add 

two thoughts: 

1. Along the lines of the DOL providing an educator, I suggest that the lifetime income 

“equivalent” values provided to employees be made available from the DOL analogous to 

that done with online Social Security projections, perhaps with mandatory basic hard 

copy estimates to be done for employees annually by employers using the DOL site. I 

would also suggest combining these estimates with those of Social Security, and 

certainly relating these to replacement ratios, further pointing out that income can also 

come from pensions and personal savings. 

2. The Academy of Actuaries outline discussing the issues involved in what might be 

offered is well done, but as I point out, merely converting lump sum projections into 

income using appropriate immediate annuity rates overestimates the incomes the lump 

sums will likely generate as few will (or should unless really under water) convert 100% 

of the lump sums into immediate annuities. Rather I suggest such a conversion, as well 

as how much will be generated along the lines of the “safe” 4%, with explanations of 

each, be used to give a range of conversion values, along with cautions of course about 

all of the other potential deviations involved. 

Obviously these are still just highlight suggestions. Please don’t hesitate to dig deeper as they 

spark interest. 

Sincerely 

Steve Cooperstein, FSA, MAAA 

President & Actuary 

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