A funny thing happened when we gave employees the latitude to invest their own retirement savings. They invariably chose the wrong investment – the fixed income option. Financial professionals , regulators and legislators all knew these naïve investors were speeding towards a brick wall. In order to avert this crisis, Congress passed the Pension Protection Act in 2006, making it easier for companies to automatically invest employee’s assets in more appropriate long-term portfolios. This law also made it easier for employees to focus on saving by forgetting about investment choices and going with the default option.

This sounded great, but the financial crisis immediately intervened. The effectively erased two to four years of growth in many peoples’ retirement accounts. For those who had the unfortunate luck to be fully invested and hit their retirement age during the 2008/09 market debacle, it was a grizzly sight. They did experience an actual retirement crisis as the markets prevented them from carrying out their original retirement plans. It was worse if they bet the farm on real estate. Of course, those who did the smart thing and accumulated two years of post-retirement savings in cash left the scene unscathed.

Nonetheless, despite these three possible scenarios, the media, opportunistic politicians, and self-interested financial product sellers created a misleading “retirement crisis” meme that has trumped all other economic meme. (For example, we are currently in the midst of a devastating employment crisis, yet the talking heads would rather quote the irrelevant “unemployment rate” number instead of the terrible “total employment” number.)

All this clamoring finally produced the intended result, with regulators this past summer “for the first time” allowing retirement plan sponsors to place “Longevity Annuities” as an option on their plan’s investment menu. This is essentially a form of insurance that gives the owner a guaranteed income once he lives past a certain age. In theory, this averts the “retirement crisis.” In reality it does nothing. This type of insurance (or annuity) has always been an option for workers – both upon retirement and during retirement. That they often chose not to avail themselves of this option is the stuff of behavioral finance research papers (hence, to voluminous to describe here).

Placing these products will do only one thing for plan sponsors – it will increase their fiduciary liability. Some might say no, but, let’s be honest. Who’s responsible for selecting these products? The plan sponsor. Since they aren’t technically investment products (they’re more like another plan service provider), it’s difficult to make the case their selection falls within the jurisdiction of a 3(38) fiduciary. And since the plan sponsor is responsible for selecting these products, who will be held liable when the insurance company fails to deliver the promised benefit? Again, the plan sponsor.

Plan sponsors long ago left the defined benefit world in order to reduce their liability. Since employees have always had the opportunity to purchase annuities directly from insurance companies, what’s the value to the plan sponsor to insert themselves smack dab in the middle of a transaction they have no interest in? And, since the company has no interest in this transaction, as fiduciary to their corporation (remember, they’re just not fiduciaries to employees), why would they ever want to throw this bundle of dynamite into a company sponsored retirement plan?