From: Jessica R. Flores [mailto:jessica.flores@fiduciary-compliance.com] 

Sent: Monday, May 03, 2010 5:34 PM 

To: EBSA, E-ORI - EBSA 

Cc: kacie.sizemore@fiduciary-compliance.com 

Subject: RIN 1210-AB33

Please accept Fiduciary Compliance Center’s submission of comments regarding the Lifetime 

Income RFI. 

We encourage the Department to hold a hearing to examine these product strategies in more 

detail. 

Thanks, 
May 3, 2010 

U.S. Department of Labor 

Employee Benefits Security Administration 

Public Disclosure Room 

200 Constitution Avenue, NW, Suite N-1513 

Washington, DC 20210 

Dear Regulators, 

In regards to the lifetime income solution, I would like to first state that I agree we need a 

solution to help ensure that retirement savings lasts through retirement and is not taken out and 

spent in the first couple years. I think that is an obvious fact that we can all agree on regardless 

of who we represent in this process. 

That said however, is about all I agree on with the other industry experts on this subject. While in 

theory, just like most initiatives on behalf of the Department, this sounds like it is in the best 

interest of the majority of the American workers, the application of this solution will be where 

the problems hide. Let’s not forget who is lobbying for this solution and who will ultimately 

manufacture such a product. 

Most of my comments will focus on the questions 1, 2, 5, 11, 13, 17, and 20 posed in the RFI. 

1. This is a great idea if it was structured in the sole interests of participants, which most 

products, especially the bundled offered by the very providers who have lobbied for 

this effort are not and are not required to be managed in the interests of participants. 

2. Steps absolutely must be taken to protect participants from spending up their 

retirement, but the products should be manufactured independently in the sole 

interests of participants and should impose fiduciary status on those who manufacture 

them. 

5. Let’s hope that the industry is not successful in defaulting employer contributions 

there too. The litigation backlash would be enormous and if the Department protects 

fiduciaries from that backlash they will do so by selling out the interests of the 

participants. 
11. We cannot become such a controlling government that we decide how folks spend 

their money, that thought is absurd. I think enforcing that some percentage is paid out 

over a de-cumulation phase and not in a lump sum makes sense, just do not define 

what vehicle that payout phase is invested in. By doing so you give all of the power to 

the industry powerhouses and accomplish exactly what they desire, guaranteed 

investments for the long term in their poorly managed products. 

13. Below explains in detail my serious concerns over a mandatory option and who will 

really benefit from such a scheme: 

The industry powerhouses and the lobbying industry associations who claim to represent the 

interests of 10’s of millions of participants while in reality voice the desires of the folks that 

profit from the participants are the key drivers behind this initiative. They have sophisticated 

studies and reports to offer that have undoubtedly been prepared by incredibly bright people to 

swindle the Department into buying into this whole thing just like they did during the efforts to 

get the target date funds into the QDIA regulations. These companies that claim to save 

participants from themselves will do all they can as they have and continue to do to distract the 

Department from the obvious – they are self-serving organizations that use the money of hardworking Americans to make profits with no regard as to the effect on the participant’s accounts. 

This is true now, has always been true and will always be true with the standards and protections 

we have blessed these organizations with receiving. 

If you spend 2 minutes considering the obvious, do you really think this scheme is going to be 

the answer? 

1. Didn’t these same financial and investment experts manage the pension assets all of 

this time? And how is that working? They could not or arguably did not manage those 

assets to meet actuarial assumptions. 

2. Didn’t these same organizations manufacture, manage, make discretionary decisions 

for and then coerce the Department into a creative default scheme for a cute little 

product called “target date funds”? Were those funds not supposed to be “THE” 

answer for retirement accumulation? Did we assign any liability to those 

manufacturers who behaved as discretionary functional fiduciaries yet escaped the 

liability and were permitted to self-deal? And how did that work out? Well, being that 

most hid extremely aggressive fixed income strategies into an allocation that 

appeared conservative to most fiduciaries and participants with no repercussions for 

their inappropriate allocations leading to massive losses in 2008, I would say it didn’t 

go so well. 

3. And, let’s not forget that this scheme has indeed already been created. What about 

fixed annuities? Why is this going to be any different than a fixed annuity? The 

insurance company earns a return in the market, credits the minimum amount they 

can get by with to contract holders and then keeps an undisclosed ridiculously 

excessive spread for themselves. This vehicle has obviously failed to adequately get 

savers where they need to be, so why are we now turning over this creative power to 

the same entities? 
This effort is simply another scheme that will provide billions of dollars in revenue to the 

financial industry while providing minimal growth to investors. There will undeniably be 

conflicts of interest, self-dealing and minimal liability associated with the management of these 

vehicles. 

If the Department continues to offer liability exemptions and relaxed fiduciary standards to the 

industry players as you have always done in the past, you can count on another major catastrophe 

like that of the target date funds. The good news is that this one will not be as evident nor as 

concentrated. Instead this one will occur over time when retirees are not experiencing reasonable 

growth in their accounts and therefore do not receive the same benefits they would if their 

accounts were invested solely in the interests of the retirees. Meanwhile, the financial institutions 

will earn billions over the course of these deals. Throw in a mandatory arrangement and you 

have guaranteed their future earnings, great news for the shareholders of these institutions. 

When will the day arrive when our government stops the bleeding of investor savings and 

regulates the institutions that manage this money? Why are institutions set up to profit from 

investor savings in their own interests with no accountability for ignoring the investors’ 

interests? What we are contemplating under this scenario is to stick a mandatory IV in the arms 

of every retiree to siphon significant blood flow which will be handed over to massive 

corporations that will sell shares of this blood to their own shareholders. Their goal is to siphon 

as much blood as possible for their shareholders and absolutely not to make certain the retiree 

retains what they deserve to maintain the quality of life they worked so hard to accumulate. 

I must hand it to them, this is a good sham. Default everyone into a target date scheme that 

makes billions of dollars for the industry, then when they are done sucking that dry, roll the 

accounts into an income scheme that will ensure they make billions more with no regard for the 

investor. If this becomes mandatory, I would expect to see an outcry from the American public 

and they may just stop funding their 401k plans altogether as their money would do better under 

their mattresses. 

This is a scheme being sold to the Obama administration and nothing at all more than that! This 

is not the first one or the last and by allowing this you are selling out the retirement savings of 

the very people the Department was formed to protect. The industry regulation efforts must 

change and change drastically before this should be even be considered. Do not be fooled by the 

studies and reports, just chase the buck and you will always find the motive behind such a 

scheme like this lifetime income product. 

17. No matter what you provide to participants, they will always be the underdog in this 

scheme. The industry knows how to overcomplicate disclosures and distract investors 

away from critical information so they can continue with business as usual. 

Fiduciaries routinely fail to disseminate the information overload to make good 

decisions for their plans, you cannot expect participants to be able to do this. No 

instead, why doesn’t the Department focus on proper regulations, liability and 

standards of care and loyalty which should be enforced and monitored at the 
regulatory level and not be passed off to fiduciaries and participants who are always 

behind the curve on the industry’s games. 

20. Again, it goes back to question 17, educate away, you will get no where, lead to more 

confusion and simply continue to give the power to the industry. It’s time for the 

regulatory agencies that are funded by taxpayers and fines to do your jobs and 

regulate. You need to hire industry insiders and experts in the areas of fraud and 

willful omissions. Forget trying to educate the common man on how to make sure 

he’s not being fed misrepresented information. And that does not mean, like the 

Department was convinced in the QDIA scheme, that the industry should take over 

without liability as you have allowed. Instead, it means service providers 

manufacturing these schemes should carry the most extensive liability far beyond that 

assigned to fiduciaries who have no idea about how the business actually works. 

Assign the liability to those who are the experts and hold the power and discretion, I 

guess I continually fail to see why the Department has yet acknowledge this very 

basic idea. 

Please tread slowly and please do not continue to be distracted by impressive charts and studies. 

And do not for one minute believe that some industry association in any way represents the 

American workers because those are not the voices lobbying behind the scenes. The biggest 

contributors and most active members of any industry association is very simply the industry 

powerhouses and those voices are very talented in the art of selling what is best for participants 

to the Department, meanwhile acting always in their own interests. Put the interests of the 

participants first and stop putting up with these conflicts of interest and self-dealing 

arrangements. 

Good luck with this adventure! 

Respectfully submitted by, 

Jessica R. Flores 

Managing Partner 

Fiduciary Compliance Center, LLC