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LEGAL ISSUES ON THE DECUMULATION PHASE FOR DC PLAN MEMBERS
Recording: The panel discussion will be recorded so that if you are not able to attend the live panel discussion you can view the recording.
Pre-reading: To provide context, and to allow the panel to assume a level of background knowledge by participants when discussing some of the more challenging and interesting issues in this area, participants will be sent a summary paper outlining the legal framework which applies to this topic in Australia, Canada, the UK and the US.
Overview and context
DC Plan members face a range of very complex choices as they move into the retirement phase of their lives. Will they outlive their retirement savings? How do they invest their retirement accounts in a time of central bank quantitive easing producing ultra low interest rates often below inflation (or even negative nominal interest rates)? Will future inflation erode the purchasing power of their retirement income? Are their choices made simpler or more complex by the regulatory and tax laws which aim to protect them from commission hungry salesmen and conflicted advisers and to reward retirement savings with tax breaks (but are the tax breaks too generous at a time of Government budget deficits)?
From an employer, plan fiduciary or product provider perspective how do you safely navigate the legal and tax rules to provide mutually beneficial outcomes for all involved? As an employer, if your employees cannot afford to retire, will you end up with substantial liabilities for age discrimination claims if you terminate their employment? As a product provider, how do you manage the risk of mis-selling claims and how do you manage conflicts of interest when problems often emerging some years after the product was provided to the DC plan member and when the scale of the issue has ballooned?
Are there developments in investment risk pooling and longevity risk pooling which can help answer some of these questions; for example collective defined contribution or other risk sharing plans? Is the tontine about to be reborn in a new form as a solution to longevity risk management? Are there learning opportunities from other jurisdictions?
DC Plan decumulation approaches and developments you may not know about
Here are some approaches and developments in this area that may be new to you:
Issues for the panel to discuss
The panel will discuss how a number of these issues are or are not dealt with in the legal and tax laws in their respective jurisdictions, including some of these recent developments. In particular:
- the different approaches to management of these risks and the insights gained from experiences so far in the 4 jurisdictions covered by the panel of speakers
- constraints imposed by tax rules in the jurisdiction in question as to what decumulation options are available
- the risk to plan fiduciaries and employers of liability in the decumulation phase
- liability for information to plan members on decumulation investment strategies and withdrawal rates
- some of the challenges of collective risk sharing in a transparent way
- to what extent does regulation help or hinder plan fiduciaries and trustees to provide retirement income projections and/or calculators to assist members to think about the expected income stream (rather than the retirement account balance).
MODERATOR: Philip Bennett, Durham University, UK
PANELISTS: Ruth Stringer, Herbert Smith Freehills, Australia, Michael Wolpert, Fasken Martineau DuMoulin LLP, Canada, Sandy Maudgil, Slaughter and May, UK, Susan Wetzel, Hayes and Boone, LLP, USA