The DOL’s most recent advisory opinion, 2025-04, helpfully affirms two separate legal principles upon which many of the defined contribution lifetime income programs being offered in the market currently rely. The AO is also very useful in the manner in which DOL describes one very specific program, the LIS program offered by Alliance Bernstein, offering a useful framework for the outlining of other (even dissimilar) programs.
The first issue only applies to the direct purchase by a plan of annuities as part of a “managed account” QDIA within a plan, often referred to as “in-plan annuities.” These insurance products are actually purchased and owned by the plan itself, unlike a number of offerings in the market where the Collective Investment Trust-not the plan-buys and owns the annuity, for which this AO should have little direct affect.
The AO specifically validated that in-plan annuities can be used as part of an in-plan QDIA managed account as long as its purchase is also in compliance with all of the other QDIA managed account rules rules. The most important of these QDIA rules for the fiduciary’s consideration in this circumstance is the one which restricts the managed account’s (which includes the annuity) imposition of restrictions, fees, or expenses on the participant’s transfer or withdrawal of funds from the QDIA in the first 90 days of deposit. This means that the fiduciary will need to affirm that the annuity selected for use in the QDIA doesn’t impose market value adjustments or surrender charges for withdrawals in those first 90 days.
The second part of the AO affirms the manner in which the 3(38) investment manager rules apply to the insurer and product selection by the managed account manager. Where the advisor making the selections has been appointed as a manager under 3(38), all of those advantages related to fiduciary liability will flow through to the employer-including, I would think, the verification of compliance with that 90 day rule, above. The AO specifically also notes availability of the two annuity safe harbors, and that they will apply to that 3(38)’s insurer and product selection if all of the requirements of those safe harbors are met. EBSA’s specific reference to those two, distinct, safe harbors is notable, given its recent withdrawal of the withdrawal of one of those safe harbors.
This clarity helps, as fiduciaries continue to build confidence in selecting lifetime income programs. By the way, a tip of the hat to both Michael Kreps, who counseled on, and succinctly drafted, the advisory opinion request; and to Jeff Turner and EBSA staff in their handling of the issue.