From: JERRY TAYLOR [mailto:JTAYLOR@nextfinancial.com] 

Sent: Monday, February 15, 2010 7:28 AM 

To: EBSA, E-ORI - EBSA 

Subject: Offering Annuities to Retirees. RFI from Treasury and DOL

To Whom it May Concern, 

Thank you for offering the “Public” an opportunity to add to your “education” pool. Thank you 

especially for offering me a chance to help in this debate. Not to braggadocio, but I have a 

qualified opinion in this arena, having been in the financial services (insurance and securities) 

industries for over 36 years and advising well over a 1000 individual people on their finances 

over that time, to say nothing of the Lord only knows how many qualified plans, SEP, SIMPLE, 

Traditional and Roth IRAs of every flavor and their Participants. 

I read an article by Robert Powell in MarketWatch (http://www.marketwatch.com/story/are-youfor-or-against-annuities-2010-02-11?pagenumber=2) wherein, by his comments, someone is 

terribly misinformed about the subjects of both “Annuities” and “Rollover IRAs” and the 

investment choices available to Qualified Plan Participants/Retirees. 

The first thing we must define is the main heading of “Annuities”. Annuities come in two major 

headings with subsets in each: 

I. Fixed Annuities. 

a. Single Premium Deferred 

 i. So called, Equity Indexed Annuities – 

fixed annuities disguised as securities. 

b. Flexible Premium (ongoing contributions available, whether actually made in 

fact or not) Deferred. 

c. Single Premium Immediate – the one apparently under consideration. 

 

II. Variable Annuities. 

a. Single Premium Deferred 

b. Flexible Premium Deferred 

Any annuity can be “Annuitized”, but, that is the act of converting or exchanging a capital 

account balance with demand rights on the capital account for a right to receive a guaranteed 

level distribution for specified periods of time, ranging from, literally, any term negotiable with 

the insurance company, but clearly, generally 10 or 20 year “period certain” with life contingency 

thereafter to Joint Life contingency with one’s spouse to Single Life Only (risky for a married 

couple). These are the general options available for retirees from, I assume, all Defined Benefit 

Plans and the annuity pondered by the Treasury and DOL in this RFI (see I. c. supra). 

There is apparently great confusion concerning “annuities”- Defined Benefit Pension Plan 

distributions, included. 

The second issue and use of terms requires defining. An IRA is not a product; Rollover or 

otherwise. “IRA” is set out at Internal Code Section §408. The FUNDING of an IRA is a 
product, ranging from bank issued CDs to Variable Annuities, with mutual funds, certain real 

estate holdings and methodology and general securities (stocks and bonds) along the way. 

All Retirement Plan Participants have the option to Rollover their Plan assets into a Rollover IRA 

now and fund it with a Single Premium Immediate Annuity and choose from among a host of 

competing insurance companies and their products and elect from among the several 

distribution/guaranteed income options as offered by Defined Benefit Pension Plans. 

There are enormously more attractive options, however. 

A plethora of insurance companies/variable annuities offer a guaranteed income for life of the 

owner/annuitant WITHOUT exchanging the capital account for a right to receive that income. 

Even better, these product provide the ability for that guaranteed income stream to INCREASE 

with the increase of the capital account, if the capital account should increase over previous 

“highest” value on policy anniversary date. The guaranteed “accounting” capital account and its 

resulting income can never decrease, and I have a whole “book” of clients whose income has 

increased as their capital accounts have increased over the past several years since these “living 

benefits” were produced by the insurance companies. 

Just a short list of companies which I know manufacture such products with these features come 

to mind include: 

1. The Hartford 

2. Jackson National Life 

3. Pacific Life 

4. Allianz Life 

5. Sun Life 

6. SunAmerica Life 

7. The Guardian Life 

8. John Hancock Life 

9. MetLife 

10. Prudential Life 

So, does the Treasury and DOL need to legislate new distribution rules to include a Single

Premium Immediate Annuity for Qualified Plan Participants?  No.  They only need to make it

easier for Plan Participants to seek counsel from Registered Securities Brokers who offer all of

these products and between the client and the representative, they can make product decisions

suitable for the client v a shoe horning of the client into something totally inappropriate for

most people.

Inappropriate?

Here are your choices:

A. Exchange your cash/capital account for a right to receive a fixed income for the next,

say, 20 years. 20 years which, if CPI follows past trends, would devalue from $1000 to

$587 (2.7% inflation rate, 20 years on the present value of $1000).

B. Retain your cash/capital account, invested into stocks or bonds or a guaranteed fixed

income account – choose‐, and receive 5% of that original capital account for lifetime –
and possibily lifetime of your spouse – have access to your capital account if needed –

and at death of yourself or your spouse (all elections to be made by the owner/retiree)

the beneficiary receives the balance of the capital account – at a minimum!  OR A

DEATH BENEFIT EQUAL TO THE ORIGINAL CAPITAL CONTRIBUTION.  The beneficiary can

receive your remaining capital or your original contribution or the highest value of your

capital on any policy anniversary over the period since you purchased it.  More; at

attained ages 65, 70, 75 and 80, your percentage of withdrawals on the highest capital

account balance on policy anniversary date – increases – your option – but it can

increase from 4%, 5%, 6%, 7%.  How about a guaranteed doubling in the intial 10 years

of your capital account for purposes of making those withdrawals?  Age 60 purchases a

VA with the features and riders described.  If he makes no withdrawals over the ensuing

10 years, his “accounting” capital account is guaranteed to double for when he choses

to begin distributions.  There are variations on all of these generally described options

among the several company’s products.

Why/Who would opt for option A when B is available?  I wouldn’t!

I would be happy to elaborate as needed.

NEXT Financial Group, Inc.

Jerry W. Taylor, Division Manager 

Investment Advisor Representative 

Mailing: P.O. Box 293780, Lewisville, TX 75029-3780 

Physical: 434 Frankie Lane, Lewisville, TX 75057-2162 

Tel (972) 221-1700 | Toll Free (800) 580-0007 | Fax (972) 221-2109 

Jerry.Taylor@nextfinancial.com | www.nextfinancial.com 

Member FINRA * Member SIPC

 “Predictions are hard to make, especially about the future” –Yogi Berra

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