Sec. 20. Lifetime income safe harbor
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Section 404 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1104 ) is amended by adding at the end the following: With respect to the selection of an insurer and a guaranteed retirement income contract, the requirements of subsection (a)(1)(B) will be deemed to be satisfied if a fiduciary— engages in an objective, thorough and analytical search for the purpose of identifying insurers from which to purchase guaranteed retirement income contracts; with respect to each insurer identified by the fiduciary under subparagraph (A)— considers the financial capability of such insurer to satisfy its obligations under the guaranteed retirement income contract; and considers the cost (including fees and commissions) of the guaranteed retirement income contract offered by the insurer in relation to the benefits and product features of the contract and administrative services to be provided under such contract; and on the basis of the foregoing, concludes that— at the time of the selection, the insurer is financially capable of satisfying its obligations under the guaranteed retirement income contract; and the cost (including fees and commissions) of the selected guaranteed retirement income contract is reasonable in relation to the benefits and product features of the contract and the administrative services to be provided under such contract.
For purposes of this section, a fiduciary will be deemed to satisfy the requirements of paragraphs (1)(B)(i) and (1)(C)(i) if— the fiduciary obtains written representations from the insurer that— the insurer is licensed to offer guaranteed retirement income contracts; the insurer, at the time of selection and for each of the immediately preceding seven years— operates under a certificate of authority from the Insurance Commissioner of its domiciliary State that has not been revoked or suspended; has filed audited financial statements in accordance with the laws of its domiciliary State under applicable statutory accounting principles; maintains (and has maintained) reserves that satisfies all the statutory requirements of all States where the insurer does business; and is not operating under an order of supervision, rehabilitation, or liquidation; and the insurer undergoes, at least every five years, a financial examination (within the meaning of the law of its domiciliary State) by the Insurance Commissioner of the domiciliary State (or representative, designee, or other party approved thereby); if, following the issuance of the representations described in clauses
(i)through
(iii)of subparagraph (A), there is any change that would preclude the insurer from making the same representations at the time of issuance of the guaranteed retirement income contract, the insurer shall notify the fiduciary, in advance of the issuance of any guaranteed retirement income contract, that the fiduciary can no longer rely on one or more of the representations; and the fiduciary has not received the notification described in subparagraph
(B)and has no other facts that would cause it to question the representations described in clauses
(i)through
(iii)of subparagraph (A). The final regulation described in
(a)shall clarify that the standard of care is not construed to require a fiduciary to select the lowest cost contract. Accordingly, a fiduciary may consider the value, including features and benefits of the contract and attributes of the insurer in conjunction with the contract’s cost. Attributes of the insurer that may be considered may include, without limitation, the issuer’s financial strength. For purposes of paragraph (1), the time of selection may be either— the time that the insurer and contract are selected for distribution of benefits to a specific participant or beneficiary; or the time that the insurer and contract are selected to provide benefits at future dates to participants or beneficiaries, provided that the selecting fiduciary periodically reviews the continuing appropriateness of the conclusion described in paragraph (1)(C), taking into account the considerations described in paragraph (1). For purposes of this paragraph, a fiduciary is not required to review the appropriateness of this conclusion following the purchase of any contract(s) for specific participants or beneficiaries. For purposes of paragraph (4)(A)(ii), a fiduciary will be deemed to have conducted a periodic review of the financial capability of the insurer if the fiduciary obtains the written representations described in clauses
(i)through
(iii)of paragraph (2)(A) on an annual basis, unless, in the interim, the fiduciary has received the notice described in paragraph (2)(B) or otherwise becomes aware of facts that would cause it to question the such representations. A fiduciary that is deemed to satisfy the requirements of this section shall not be liable following the distribution of any benefit or the investment by or on behalf of a participant or beneficiary pursuant to the selected guaranteed retirement income contract for any losses that may result to the participant or beneficiary due to an insurer’s inability to satisfy its financial obligations under the terms of such contract. For purposes of this section— The term insurer means an insurance company, insurance service or insurance organization qualified to do business in a State; and includes affiliates of such companies to the extent the affiliate is licensed to offer guaranteed retirement income contracts. The term guaranteed retirement income contract means an annuity contract for a fixed term or a contract (or provision or feature thereof) designed to provide a participant guaranteed benefits annually (or more frequently) for at least the remainder of the life of the participant or joint lives of the participant or the participant’s designated beneficiary as part of an individual account plan. This section sets forth an optional means by which a plan fiduciary will be considered to satisfy the responsibilities set forth in section 404(a)(1)(B) with respect to the selection of insurers and guaranteed retirement income contracts. This section does not establish minimum requirements or the exclusive means for satisfying these responsibilities. .
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Sec. 20
Lifetime income safe harbor
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