WRITTEN TESTIMONY 

SUBMITTED BY 

ROBERT E. SOLLMANN, JR. 

EXECUTIVE VICE PRESIDENT 

RETIREMENT PRODUCTS 

ON BEHALF OF METLIFE 

FOR 

THE DEPARTMENT OF LABOR 

THE DEPARTMENT OF TREASURY 

THE INTERNAL REVENUE SERVICE 

________________________________________________________________ 

HEARING ON CERTAIN ISSUES RELATING TO 

LIFETIME INCOME OPTIONS FOR 

PARTICIPANTS AND BENEFICIARIES IN RETIREMENT PLANS 

________________________________________________________________ 

SEPTEMBER 2010
HEARING ON CERTAIN ISSUES RELATING TO 

LIFETIME INCOME OPTIONS FOR 

PARTICIPANTS AND BENEFICIARIES IN RETIREMENT PLANS

Good afternoon. My name is Bob Sollmann and I am the Executive Vice President for 

Retirement Products at MetLife. I am here today to testify on behalf of MetLife. 

MetLife commends the Department of Labor (the “DOL”), the Department of the 

Treasury and the Internal Revenue Service (collectively, the “Agencies”) for issuing the 

RFI and holding this hearing on this very important topic. Thank you for inviting 

MetLife to testify and to share our thoughts and experiences with you. We believe the 

hearing today and the work of the Agencies are critical to the future retirement security of 

America’s retirees. 

MetLife’s Perspective 

With over 140 years of experience, MetLife, Inc. is a leading provider of insurance, 

employee benefits and financial services. As a well-known and trusted industry leader, 

MetLife serves more than 70 million customers around the world and over 90 of the top 

one hundred FORTUNE 500® companies in the United States. 

MetLife has a broad perspective of the retirement market and the retirement needs of 

American workers because of its longstanding presence in -- and commitment to -- the 

individual and institutional markets, its broad product portfolio and its multiple 

distribution channels. 

In the individual markets, MetLife has been one of the leading sellers of annuities since 

2007 and has $134.5 billion of variable and fixed annuity assets under management, $2.3 

billion of fixed income annuity assets and $26 billion of assets relating to our 403(b) 

clients as of June 30, 2010. MetLife supports its customers through one of the broadest 

distribution systems in the industry, selling through banks, independent broker-dealers, 

independent agents, full service national broker dealers and its own representatives. This 

provides insights not only from the perspective of a leading issuer of annuities, but also 

from the daily in person interactions through its own representatives. 

In the institutional markets, MetLife is a leading provider of institutional income 

annuities with a history of firsts. The company was the first insurer to issue a group 

annuity contract in 1921, the first to offer an in-plan accumulation option (Personal 

Pension Builder®) for defined contribution plans in 2004 and the first to introduce a 

longevity insurance product. MetLife manages $60 billion of group annuity assets, has 

over 10,500 group annuity contracts and guarantees income payments to more than one 

million individuals. 

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MetLife’s commitment to strengthening Americans’ retirement security is informed by 

the Mature Market Institute® (MMI), MetLife’s research organization and a recognized 

thought leader on the multi-dimensional and multi-generational issues of aging and 

longevity. MMI’s groundbreaking research, gerontology expertise, national partnerships, 

and educational materials work to expand the knowledge and choices for those in, 

approaching, or caring for those in the mature market. 

Background

The retirement landscape has changed dramatically since the introduction of 401(k) plans 

in 1978. Historically, large numbers of Americans relied on traditional defined benefit 

plans; today, most Americans are relying, in large part, on defined contribution plans as 

their primary source of retirement savings. In most cases, defined contribution plans 

were designed – and are maintained today – as supplemental retirement savings vehicles 

not generally structured to provide guaranteed lifetime income. 

Why is lifetime income so important? One of the greatest risks facing retirees is 

longevity risk – the very real risk of outliving retirement savings. Individuals who spend 

down their retirement assets based on their life expectancy will run out of savings if they 

live longer than expected, which half the population will do. On the other hand, many 

individuals who spend as if they will live well beyond their life expectancy will run the 

risk of under spending, forcing significant changes in lifestyle for fear of running out of 

money. The only product capable of avoiding both of these adverse results is an annuity. 

Until now, policymakers have focused their attention on coverage and savings rates. 

However, with increased longevity, the continued decline of the defined benefit plan 

system, and the impending retirement of 47 million baby boomers – the first boomer 

turns 65 in 2011 – the Administration’s focus on strengthening lifetime income for 

Americans is both needed and timely. 

Topic 1: Information to Help Participants Make Choices Regarding Management 

and Spend Down of Retirement Benefits

MetLife believes that one of the cornerstones making retirement successful for 

Americans is to ensure that participants have available particular type(s) of information 

necessary in order to make choices regarding the management and spend down of their 

retirement assets. 

The DOL has done excellent work in providing guidance on how plan sponsors can 

effectively provide participants with education and advice regarding the accumulation 

phase of defined contribution plans. It is now time to turn the industry’s attention to the 

decumulation phase, which will focus on ways to enable American workers to retire with 

dignity. If the industry provides the appropriate education and tools to American workers, 

such as those being used during accumulation, we should see substantive progress 

towards enabling Americans to feel secure in their retirement. 

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Education. Interpretive Bulletin 96-1 (“IB 96-1”) sets forth guidance regarding 

how employers can provide participant education with respect to the allocation of 

retirement savings among classes of investments. IB 96-1 has been used 

extensively by employers that want to help their employees without taking on 

fiduciary liability for the provision of investment advice. 

Advice. The DOL has also issued critical guidance with respect to the provision 

of investment advice. The SunAmerica Advisory Opinion has led to a great 

expansion of advice based on computer models using generally accepted 

investment theories. Much of this computer model advice is provided through 

managed accounts, where the advice is implemented automatically and can prove 

to be more effective than advice that participants may follow on their own. The 

DOL has an opportunity to build on the important success that it has achieved in 

the accumulation phase by applying the same framework to the distribution phase. 

Recommendations. MetLife recommends four additional steps be taken with respect to 

participant education and advice. The first two relate to IB 96-1 and the second two relate 

to guidance with respect to advice provided through computer models. 

Education.

1. Guidance is needed to clarify what education may be provided to participants about 

the distribution phase without that guidance being treated as investment advice 

leading to fiduciary liability. Such guidance should be as detailed as IB 96-1. For 

example, the guidance should clarify that computer models that generate generic 

distribution approaches should be treated as education, not advice. Under the IB 96-1 

expansion that MetLife is recommending, a participant could provide his/her own 

information, such as other assets, other sources of income (such as Social Security or 

a pension or spousal pension), age, risk tolerance and annual living expenses. The 

computer model could then generate a generic distribution model regarding the 

portion of the participant’s account that should be annuitized, the portion that should 

be rolled over to an IRA, the portion that should be taken in the form of installment 

payments, etc. This type of modeling should be permissible for providing distribution 

education. Finally, as with the DOL’s investment guidance, the DOL’s distribution 

phase guidance should permit such guidance to be paid for with plan assets. 

2. The current investment elements of IB 96-1 should be expanded to clarify that 

education regarding investment in in-plan accumulation annuities and guaranteed 

insurance products is within the reach of IB 96-1’s existing framework and is not 

investment advice. 

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Advice.

3. The DOL should issue “SunAmerica-like” guidance with respect to the distribution 

phase. In other words, a financial institution would be allowed to contract with an 

independent expert that would develop and apply a computer model for providing 

distribution advice based on generally accepted decumulation principles. The 

computer model would receive the same type of participant data described above 

regarding assets, expenses, etc. It would generate specific recommendations based on 

the plan’s distribution options. For example, the computer model might recommend 

receiving a specific portion of the account in the form of a particular annuity available 

under the plan, and receiving another portion in the form of a specific installment 

option. The computer model could also make recommendations regarding how 

undistributed assets should be invested. 

4. The final step for the DOL to take is to incorporate in-plan accumulation annuities 

and guaranteed insurance products into the SunAmerica and Pension Protection Act 

of 2006 (“PPA”) computer models. In-plan accumulation annuities provide the 

distribution analogue to dollar-cost averaging into the market by permitting 

participants to buy guaranteed pieces of future income at then prevailing interest rates 

with each contribution. This avoids the risk that interest rates will potentially be low 

at the point of retirement when a large annuity purchase is made. In-plan 

accumulation annuity education material would also help participants by framing 

retirement needs in terms of future income, rather than asset accumulation. Finally, 

in-plan accumulation annuities allow participants to buy annuities in small increments, 

thereby avoiding the intimidating “big purchase” at retirement. 

If defined contribution plans are to be successful as the primary retirement income 

plan for today’s workforce, it is essential that annuities become a prominent feature. 

The DOL can help achieve this by providing that neither a SunAmerica type 

computer model nor a PPA computer model will be treated as valid unless it takes 

into account any annuity available under the plan. To allow computer models to 

disregard these types of products is to relegate them to second-tier status and 

effectively ensure that these products will not be utilized materially by participants. 

We make these recommendations because our research tells us that people are more 

confused than negative about annuities. This confusion underscores the need for 

education. When education and advice about distributions are provided, especially at the 

workplace, participants show they are hungry for the information. MetLife’s retirewise® 

program is an employer-sponsored workplace retirement planning seminar offered by 

over 500 employers nationally. Approximately 50% of the employees who attend these 

seminars request the complimentary face-to-face consultation to gather information for 

their specific situation. To us, the success of retirewise also demonstrates that employers 

are seen as a trusted source of information on retirement. 

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Topic 2: Alternative Designs of In-Plan and Distribution Lifetime Income Options

MetLife recommends that the Agencies provide enhanced education to plan sponsors 

about their ability to offer partial annuitization to participants and the benefits that it can 

provide. We further recommend exploration of proposals to encourage such plan designs. 

Offering partial annuitization is critical to the success of creating guaranteed income in 

retirement. From the individual’s perspective, purchasing an annuity with a portion of 

their assets to cover a specific need is more palatable and helps to minimize the negative 

aspects of a large one-time purchase. Partial annuitization directly addresses the “all-ornothing” concern. Our experience indicates that, when participants have the opportunity 

to partially annuitize their account balances, they do so in greater numbers than when 

total annuitization is their only option. 

For example, MetLife has been the exclusive annuity provider for the Federal Thrift 

Savings Plan (“TSP”) since the plan’s inception more than 20 years ago. When the plan 

first began, the annuity was an “all or nothing” offer – the participant had to either 

annuitize their entire TSP balance at retirement or none of it. In 2004, the TSP amended 

the plan to include partial annuitization. The TSP has seen immediate, dramatic and 

sustainable results. In 2003, there were 784 purchases. In the five years following 

(2004-2008) the number of purchases increased to 1,645 on average, a 110% increase in 

the number of participants annuitizing a portion of their account balances. In addition, 

there was a significant increase (60%) in the average purchase amount of the annuities 

from $66,000 to $106,000. 

MetLife also requests the DOL consider revising the Qualified Default Investment 

Alternatives (QDIA) regulations to require that QDIA’s contain an in-plan accumulation 

annuity component which is designed for workers while they are actively saving for 

retirement. The theory underlying target date funds and managed accounts is that they 

are aimed at preparing an individual for retirement. The deficiency is that most target 

date funds focus exclusively on the accumulation phase and do not prepare individuals 

for the equally challenging distribution phase. The DOL has an opportunity to remedy 

this deficiency. This change alone would have a dramatic effect on participants’ 

readiness for the distribution phase of retirement. 

Deferred fixed income annuities are already beginning to be added to some target date 

funds as their fixed income component and MetLife is pleased to be working with an 

investment management firm who introduced this concept to the market. In this situation, 

the annuity allocation automatically increases as the plan participant gets closer to 

retirement. The annuity allocation within the target date fund, for example, might start at 

5% at age 25 and grow to more than 50% at the point when the participant plans to retire. 

In-plan accumulation annuity products allow employees to create their own “personal 

pension.” Offered as a complement to, or as an option within, a defined contribution plan, 

this type of product is unique in that each contribution an individual makes is 

immediately converted to a specific future income benefit that is guaranteed to last a 

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lifetime. These annuities have clear advantages, such as providing participants with a 

means to spread purchase payments over time at different interest rates, thus avoiding the 

risk of purchasing a large annuity at retirement when interest rates may be low. 

Another strategy that can create lifetime income is to allocate a portion of one’s assets to 

longevity insurance – a deferred income annuity – that would be purchased at the point of 

retirement but would not begin payments until the individual reaches average life 

expectancy (generally age 80 or 85). This product is specifically designed to allow 

individuals to address their longevity risk. They set aside a portion of their retirement 

savings now in order to generate a steady stream of guaranteed income in the later years 

when it may be needed most. It also allows them to manage their other retirement assets 

to a limited time horizon. 

The advanced age when longevity insurance payments commence generally exceeds the 

age 701⁄2 required beginning date for the required minimum distribution (“RMD”) rules. 

Therefore, to comply with RMD requirements, longevity insurance offered under a 

retirement plan or IRA must currently address the possibility of being required to 

distribute RMD amounts prematurely. In the event that non-longevity insurance assets 

are depleted, either the RMD rules would be violated or the annuity contract will have to 

permit distributions (in which case there would be an adverse impact on future income 

payments and the contract would no longer be longevity insurance). Accordingly, 

longevity insurance generally is not offered to plans and IRAs today. 

The offering and use of longevity insurance would increase significantly by changing the 

RMD rules to exempt longevity insurance acquired within qualified retirement plans or 

IRAs from the RMD requirement, until distributions from the longevity insurance 

product begin (which could be required by a certain age, such as 85). This proposal, 

which could be adopted either legislatively or administratively, has been introduced in 

several legislative bills, including the Retirement Security Needs Lifetime Pay Act of 

2009 (H.R. 2748) originally introduced by Representatives Earl Pomeroy and Ginny 

Brown-Waite. 

Topic 3: Disclosure of Account Balances as Monthly Income Streams

MetLife believes that defined contribution plan account balances should be 

communicated in terms of the lifetime income they represent, in addition to the total 

account balance, on an annual benefit statement. Participants have little understanding of 

how much to save or how to invest those savings to achieve an adequate retirement 

income. They also have little to no understanding of how to ensure that their defined 

contribution savings will last throughout their retirement years. Educational tools like 

benefit statement disclosure of annuity equivalents, which seek to shift the focus from 

assets to retirement income, can help individuals begin to understand how to turn that 

lump sum into an income to last a lifetime. 

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MetLife believes that communicating account balances as an annual income stream will 

serve a twofold educational purpose: not only will it show what income amounts are 

possible from the current account balance (thereby reorienting participants’ views of their 

defined contribution plans as a retirement plan), it could also prompt them to increase 

their savings level within the plan in order to achieve greater income levels at retirement. 

MetLife believes that this conversion amount will ultimately educate participants of all 

ages to increase their savings to more appropriate levels. A T. Rowe Price study in 2007 

found that when participants are shown their account balances as a monthly annuity 

amount, individuals were motivated to increase their savings levels. 

This income amount should be based on conversion factors published by the DOL unless 

the plan includes an annuity, in which case the annuity factors in the plan may be used to 

convert the account balance. 

The Pension Benefit Guaranty Corporation annually surveys commercial annuity 

providers and aggregates those rates to determine an average rate that is then used to 

calculate the annuity values that they use to pay plan participants under their control. 

Those rates are an accurate reflection of current annuity rates in the market. MetLife 

recommends that the DOL use those rates (or a similar market survey) in developing their 

conversion tables. 

The annuity amount should be shown as both a single life and a QJSA; QJSA disclosures 

would need to be based on one or more assumptions regarding the age of the spouse. The 

DOL should also issue model notices that plan sponsors could use to communicate this 

information to plan participants. 

Plan sponsors that rely on the DOL’s tables and notices should be relieved of fiduciary 

liability for the income amounts displayed on the benefit statements. 

MetLife does not recommend that projections be made regarding future contributions in 

this calculation. Since these conversions are educational in nature and not intended to 

imply any guarantees of future employment, a static number at a point in time should be 

sufficient to meet the educational intent. The calculation should be made based on 

projecting the current account balance to age sixty-five (or whatever the normal 

retirement age is under the plan), so that participants are able to see what their current 

account balance would translate into on a monthly income basis. 

Topic 4: Fiduciary Safe Harbor for Selection of Lifetime Income Issuer or Product

With increasing litigation surrounding the administration of defined contribution plans, 

plan sponsors are reluctant to engage in activities that may expose them to additional 

litigation. Congress and the DOL have been sensitive to the changing nature of the 

retirement plan system and the need to provide clarity regarding a fiduciary’s duties. As 

a result of a provision included in the PPA, the DOL issued new regulations in 2008 on 

the fiduciary standard to be applied by defined contribution plan sponsors when selecting 

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an annuity provider. The new standard, incorporated in DOL’s regulation 29 CFR §

2550.404a-4, contains a fiduciary safe harbor for the selection of annuity providers for 

the purpose of benefit distributions from defined contribution plans. 

The new standard has addressed some of the concerns raised by plan sponsors with the 

“safest available annuity” standard promulgated by the DOL for defined benefit plans, 

including the statement that the fiduciary does not have to choose the “safest” annuity 

available. However, plan sponsors continue to express concerns regarding any plan 

decisions that may expose them to future lawsuits. Thus, even with the simplification of 

the fiduciary standard that the DOL promulgated, plan sponsors are still expressing 

reservations about their ability to implement the standard without exposure to undue risk. 

Plan sponsors have indicated to us that their decisions to allow annuitization in their plans 

will turn on this issue. MetLife stands ready to assist the Department of Labor in any way 

possible as it evaluates potential solutions to this concern. 

Conclusion

MetLife thanks you for the opportunity to share our thoughts and experiences with the 

Agencies on this significant topic. As a society, we – including the government, 

employers, and the financial services industry – collectively have a role in providing the 

education and tools to American workers so that their efforts to save for their retirement 

are rewarded with retirement security. The financial services industry has developed new, 

innovative products to address the concerns raised by employers and individuals about 

income products. While it may be possible to manage lifetime income in the retail market, 

employers are expressing interest in helping their employees achieve lifetime income 

security and employees are increasingly asking for this to be available in the workplace. 

Without appropriate legislative and regulatory guidance in this area, we believe that plan 

sponsors will not act in sufficient numbers to give their employees an opportunity to 

create guaranteed lifetime security from their defined contribution plan assets. 

On behalf of MetLife, I would like to thank the Agencies for holding these important 

hearings and for inviting me to testify today. I would be happy to answer any questions 

you may have. 

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