The Treasury Department just released a proposed set of regulations that could have a meaningful impact on the retirement income market in the U.S.

The Treasury’s guidance package builds on feedback received in response to the request for comments issued by the Labor and Treasury Departments last fall.

The proposed regulations appear to be squarely focused on longevity risk.  The basis for this concern—particularly as it pertains to the middle class—is summarized in the following chart:

Defined benefit pension plans are the traditional and increasingly rare type of pension plans offered through employers.

In contrast to defined contribution pension plans such as the 401(k), participants in defined benefit (“DB”) plans receive contractually guaranteed income and assume none of the risks (investment risk, interest rate risk, longevity risk, etc) associated with producing that lifetime income stream.

The problem is that defined benefit plans are scarce, and many of those that do still exist are in tough shape.

A very interesting article from Financial Times columnist David Stevenson suggests that investors are making the very common mistake of missing sight of the forest for the trees. 

In this case, the trees are the daily ups and downs of the stock market.  Market volatility naturally draws many people into a sort of short-term obsession with undulating asset prices and portfolio values. 

There is an interesting blog that appears to be affiliated with the British pension consulting firm Redington.  

The “Red Blog” offers pension-related content from a group of authors who are both formally and informally associated with Redington. 

Not surprisingly, longevity trends and longevity risk are prominent topics on the Red Blog. 

The design of the blog and the visual representation of dry and fairly abstract topics are unique. 

At the request of Wisconsin Senator Herb Kohl, the Government Accountability Office (GAO) just released a study that provides an assessment of the current state of the retirement income market in the United States.

For those interested in retirement income, the study is full of interesting data and conclusions.  Some of the highlights include:

A recent article in Bloomberg discusses the state of capital market solutions for the transfer of longevity risk.

The reality is that the longevity market is still in its infancy and there are a number of obstacles that are affecting its development.

One of the main hurdles involves the fact that longevity risk is very long-term in nature.  Securities that mature over the course of 20 years are not hugely appealing to hedge fund managers who are providing quarterly performance reports to their clients.

Putnam Investments President and CEO Robert Reynolds spoke on the need to address America’s lifetime income challenge at the recent Retirement Income Industry Association (RIIA) conference in Chicago.

While Reynolds has spent most of his career in leadership positions in the investment management industry, his comments and recent initiatives at Putnam focus on what Reynolds believes should be a golden age for innovation in the area of guaranteed income solutions.  

JP Morgan recently assumed 70 million pounds of longevity risk through a longevity swap that covers the lives of active members of a UK-based defined benefit pension plan.

This is the first longevity swap that covers active pension plan participants.  Previous deals have focused on retired pension plan members.

The longevity swap is based on JP Morgan's LifeMetrics longevity index and it has a 10 year term.  The index-based swap is reportedly a better vehicle for dealing with active pension plan members.

There is a strong case to be made for health care as the linchpin of retirement planning.  Virtually every major aspect of the retirement planning process is somehow correlated to or contingent on health status.  For example, health status has an impact on each of the following retirement planning components:

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