Products December 15, 2014

DCIIA Offers Clarification of Longevity Annuity Rules

The DCIIA has released a FAQ document about new regulations for qualifying longevity annuity contracts in retirement plans.
Reported by

In its newly released document, “Qualifying Longevity Annuity Contracts: Answers to Frequently Asked Questions (FAQs),” the Defined Contribution Institutional Investment Association (DCIIA) provides insight into recently announced regulations that make longevity annuities accessible to the defined contribution (DC) and individual retirement account (IRA) markets.

Prior to the issuance of regulations announced by the Internal Revenue Service (IRS) in July, longevity annuities were, as a practical matter, not accessible to DC and IRA investors due to Internal Revenue Code rules that require distributions from a DC or IRA account to begin by age 70½, which is prior to the age longevity annuities are designed to begin income payments, the DCIIA notes. With the new regulations, qualifying longevity annuity contracts (QLACs) are exempt from required minimum distribution (RMD) rules within prescribed parameters.

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The FAQs resource seeks to provide clarification of common questions that plan sponsors and their advisers may have regarding these new regulations. Among others, the document answers such questions as:

  • What is a “qualifying longevity annuity contract” (QLAC) as referred to in the regulations?
  • When are the regulations effective? Do they apply to existing annuity contracts?
  • What defined contribution plan types are allowed to offer a QLAC?
  • Do contract holders have to wait until age 85 before payments from the QLAC can begin?
  • What happens if a contract holder accidentally exceeds this limit? Will the dollar limit increase over time and, if so, how?
  • Are there any reporting requirements for a plan sponsor or plan provider with regard to the QLAC?
  • These final regulations address QLACs, but do they have any impact on other annuities offered in-plan or in other retirement accounts, such as fixed annuities or variable annuities with “guaranteed minimum withdrawal benefit” (GMWB) riders?
  • Do these regulations apply to defined benefit plans?

The document is available here.

Compliance December 15, 2014

Pressure to Retire Leads to Age Bias Suit

The EEOC says a company fired two employees because of age after repeatedly pressuring them to retire.
Reported by

Blinded Veterans Association (BVA), a Washington, D.C.-based non-profit that provides services to blind veterans, is facing an Age Discrimination in Employment Act (ADEA) lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC).

The EEOC charges that BVA officials, including a member of the BVA board of directors, repeatedly asked Lazaro Martinez, who was then age 76 and had worked for BVA for 34 years, when he would retire from his position as assistant national field service director at the association’s Mather, California, location. Martinez replied that he was not considering retirement. 

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About two months later, BVA announced that it was “reclassifying” certain jobs, including Martinez’s position, and that he needed to compete for one of the newly-created national field service officer positions if he wanted to remain employed by BVA. In order to compete for one of the newly created jobs, BVA imposed on Martinez arbitrary and unrealistic requirements. According to the lawsuit, BVA terminated Martinez because of his age and selected a younger candidate for a national field service officer position.

The EEOC also contends that Suzanne Matthews, who was then 70 years of age, had worked for BVA in Washington, D.C. for approximately 15 years when her supervisor repeatedly asked her, “When are you going to retire?” and “When are you moving to Florida?” Despite her good job performance, BVA abruptly terminated Matthews from her position as an administrative assistant to the national director of field service. After being notified of her termination, Matthews applied for a newly created BVA position for which she was qualified. The lawsuit charges that BVA fired Matthews because of her age and selected an employee for the newly created position who was more than 20 years younger than Matthews and who had only three years of experience with BVA.

“Employers head in the wrong direction if they make employment decisions based on age or try to pressure employees to retire,” said Washington Field Office Acting Director Mindy Weinstein in an EEOC statement. 

EEOC Philadelphia District Office Regional Attorney Debra M. Lawrence added, “Targeting older workers under the pretext of a reorganization doesn’t fool anyone—it’s clearly age discrimination, and clearly unlawful.”

In the lawsuit, the EEOC is seeking an injunction prohibiting BVA from engaging in future age discrimination, lost wages and liquidated damages, as well as other affirmative relief.

The case, EEOC v. Blinded Veterans Association (Civil Action No. 1:14-cv-02102), was filed in the U.S. District Court for the District of Columbia.

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