1. “DC Plans – What about the distribution phase
“DC Plans – What about the distribution phase?” National Pension and Institutional Investor Summit
Josh Cohen
Senior Consultant
Russell Investments
December 3, 2009

2. Who is the IRIC?
Non-profit group of 15+ industry consultants and advisors plus 3-4 co-sponsors with focus on institutional retirement income solutions.
The mission of the IRIC is to facilitate the culture shift of defined contribution plans from supplemental savings plans to programs that provide retirement security.
The vision of the IRIC is to be recognized by plan sponsors, intermediaries, recordkeepers, product manufacturers and distributors, as the industry’s leading source of information and thought leadership on institutional retirement income solutions.
The key objectives of IRIC are to:
Establish a forum for unbiased, solutions-oriented thought leadership on institutional retirement income;
Identify and overcome barriers that impact the offering of institutional retirement income solutions by plan sponsors and utilization by participants;
Develop best practices and tools for how institutional retirement income solutions may be evaluated, selected, implemented, and monitored;
Identify and address issues and concerns that will arise as institutional retirement income solutions become more prevalent; and,
Promote the need for retirement income security for defined contribution plan participants.
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3. Evolution of Defined Contribution Plans
Defined Contribution becomes the retirement plan
Shifts key risks from plan sponsor to participants: market, inflation, longevity
Applying lessons from “behavioral finance” improves outcomes
How does participant receive sustainable lifetime income stream?
* Private Pension Plan Bulletin, Abstract of 2006 Form 5500 Annual Report, US Department of Labor Employee Benefit Security Administration, December 2008
Defined Contribution becomes the retirement plan
Shifting risk from plan sponsors to participants
Both during the accumulation stage and during the decumulation stage
Focus on asset accumulation
As opposed to getting pre-retirees to begin thinking about sustainable retirement income
Lessons learned from participant behavior and behavioral finance
Automate activity where possible
Default and Creates the right track for participants to follow
Result is auto enrollment and auto escalation resulting from PPA
Pension Protection Act addressed accumulation issues, not income issues
Pre retirees and retirees are still at risk when it comes to generating income from DC Plans
Over 2 trillion dollars was lost over the last year in pension plan assets as of mid October due to market downturn
How does participant receive sustainable lifetime income stream?
This is the key question that defined contribution plans have yet to address
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4. Why Plan Sponsors Should Consider Institutional Retirement Income Solutions
Before analyzing any income solutions, Plan Sponsors should ask themselves:
What problem(s) are we trying to solve?, e.g.:
Transitioning from a DB plan (enhancing the value of the DC plan)
Retaining assets in the plan (in-plan solutions)
Declining productivity
Large portion of workforce nearing retirement age
Improve employees’ financial security
What level of commitment do we have?
Simply make it available
Actively encourage
Achieve meaningful results (high utilization)
How much are we willing to take on?
Administration
Communication
Costs
Fiduciary liability
Help employees achieve retirement income security through their retirement plan
Employer based solutions offer familiarity, ease of use, and lower costs
Employers are uniquely positioned to influence employees
Employees expect employers to provide “smart” benefit choices
Plan design, options, and defaults send powerful messages
Reputational risk when retirees become destitute
54% of workers who took a lump sum in spent it all within 3 years*
Reduce threat of congressional mandates
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5. Types of Institutional Retirement Income Solutions
Available income solutions fit into one of six categories:
In-plan immediate annuities
In-plan deferred fixed annuities
In-plan guaranteed minimum withdrawal benefits
In-plan guaranteed minimum income benefits
Out-of-plan immediate annuity rollover platforms
Out-of-plan guaranteed minimum withdrawal benefits
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