Two leading lawmakers responsible for oversight of the country's retirement policy have written top regulators expressing their concern with the de-risking of private defined benefit plans.
Sen. Ron Wyden, D-Oregon, chairman of the Senate Finance Committee, and Sen. Tom Harkin, D-Iowa, chairman of the Committee on Health, Labor, Education and Pensions, claimed there is a "lack of clear and specific rules to protect participants and retirees" in pension de-risking schemes.
They are calling on the secretaries of Treasury and Labor, the acting director of the Pension Benefit Guaranty Corp. and the director of the Consumer Financial Protection Bureau to consider establishing guidance for sponsors on their fiduciary obligations when they de-risk plans.
Recommended For You
When sponsors transfer pension liabilities to insurance companies though the purchase of massive annuities, participants lose the insurance protections of the PBGC, wrote the senators. Their savings also are no longer protected from creditors.
With lump-sum buyouts of pensions, also growing in popularity with sponsors of defined benefit plans, participants lose all of ERISA's protections and assume the risk of self-directing their retirement savings over the course of their retirement.
"Lump-sums have no spousal protections and retirees looking to invest a lump-sum could be victims of poor financial advice," the lawmakers wrote.
Specifically, Wyden and Harkin would like to see regulators require sponsors to disclose the risks to participants when they de-risk pensions, including the loss of spousal protections, PBGC insurance, and the limitations of pension guarantors at the state level.
They also want to require sponsors to select the annuity that most closely contains ERISA protections, and warn participants of the tax exposure incurred when they accept a lump-sum, as well as the risk that they may outlive their savings.
The speed with which more plans sponsors are proceeding with de-risking measures makes the need for regulatory guidance urgent, according to the senators.
"America's seniors cannot afford further delay," they wrote.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
