401K Follies: A Proposal to Reinvigorate the United States Annuity Market
ABA Tax Section NewsQuarterly, Forthcoming
4 Pages Posted: 9 Aug 2010 Last revised: 14 Aug 2010
Date Written: August 12, 2010
Even given potential issues with requiring an annuity option for 401K plans, the time has come to hedge as a society against the risk associated with the recent embrace of the 401K as the private retirement funding vehicle of choice in the United States. The proposal described herein seeks to diminish the retirement security deficit through three interlocking regulatory parts: (1) a requirement to offer an annuity as part of 401K distribution options; (2) mandatory education pre-distribution on annuities; and (3) mandatory fee disclosure by annuity providers. These steps will likely reinvigorate the annuities market in the United States and help to bring an end to the 401K Follies.
Keywords: 401K, annuities, lump sum distribution, pre-retirement leakage, pensions, employees
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