The Pension Benefit Guaranty Corporation Shows Support for Annuities

The Pension Benefit Guaranty Corporation continues to pay out benefits from defined benefit plans that have been lost because of insufficient funds.  This non-profit corporation is part of the U.S. Department of Labor.  They have just issued a new proposal that shows unwavering support of using annuities to guarantee lifetime income in your retirement planning.  While this doesn’t directly affect the private annuity industry, the PBGC support is important to the annuity industry in general.  According to Linda Koco of Annuity News in “A PBGC Booster Shot for Annuities,” the organization is showing strong support of the use of annuities in retirement planning.

When workers roll 401k plans or other employment savings into a defined benefit plan from the same company, the PBGC wants the workers to know that they will be fully supported.  In the unfortunate case where companies go out of business and their defined benefit plans run out of money, the PBGC would take over the payments to the employees.  This new proposal assures employees that the PBGC would not punish them by altering the assets they have already accumulated in their pension plan.  The PBGC’s director says that “annuities always offer greater retirement security.”  They want to make sure that as many Americans as possible will have guaranteed income during their retirement.  Some companies allow rollovers from a defined contribution plan to a defined benefit plan.  If you do this rollover and the PBGC takes over the payments at any point, you will not be subject to their guarantee payout limits.

Those who work directly with annuities usually don’t have anything to do with plan terminations, but the clients who hold the annuity are greatly affected.  Even so, annuity professionals should take note of this PBGC proposal because of what it means for overall annuities.  It is a boost for the industry because the government is saying that annuities are important and they are one of the only ways to guarantee lifetime income.  Rollovers from defined contribution plans to defined benefits plans offer employees larger guaranteed income benefits.  The pension is essentially an annuity product.  For those employees who do not have the option to rollover their contributions into an annuity at work, there are many 401k annuity rollover options in the private industry.  If you would like to turn your retirement savings into an annuity to guarantee lifetime income, an Annuity FYI expert would be happy to answer any questions that you have.

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