lifetime income solutions task force meeting minutes meeting.pdf · lifetime income solutions task...

Lifetime Income Solutions Task Force Meeting Minutes

Date: April 20, 2010

Location: OppenheimerFunds

2 World Financial Center

New York, NY

I. Background and Meeting Objectives

Larry began the meeting with background on the Task Force and its objectives, including a

review of the member companies on the Task Force and the specific individuals involved on the

“Provider Team,” which has been most active in the development work so far. He then reviewed

the scope of the initiative, milestones to date and outlined the objectives for the meeting. (See

attached PowerPoint presentation #1 for details.)

II. General Overview of Initiative and Data Layouts

Larry began with a review of the draft Data Layouts document by describing Part 1, the File

Layout Conventions and Data Sharing. He noted that the basic format is comparable to what The

Institute had created for the 403(b) Best Practices document. Mike Westohoven of Genworth

then provided a general overview of the three basic service models which would support the

current products – Record Keeper Traded Model (based on the mutual fund model for record

keeping and trading); the Provider Traded Model (based on a self directed brokerage concept for

record keeping and trading); and the Guarantee Administrator model (similar to the Record

Keeper Traded model except that the Guarantee Administrator manages a pool of reinsurers).

Mike then generally described the three types of core products: Guaranteed Minimum

Withdrawal Benefit (GMWB), Guaranteed Minimum Income Benefit (GMIB), and Deferred

Fixed Income Annuity. (See attached PowerPoint Presentation #1 for details).

Larry noted that the intent is to build the standards to the lowest common denominator, as was

done with the 403(b) document, so that it is more likely to be widely adopted by service

providers, regardless of their size or system capabilities.

III. Record Keeper Traded Service Model

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SHAPING AMERICA’S RETIREMENT

2

Len Steiner of Prudential reviewed the information workflow for the Record Keeper Traded

Service Model, describing the type and flow of data to be transmitted between the product

provider and the record keeper. One member raised the issue of whether the layout and

workflows are being designed to accommodate restrictions, such as waiting periods, because

record keepers would have to program for any specific rules. Larry and Len noted that we could

have a general restriction feed/file structure and different codes could be used for various

restrictions. Providers were asked to submit any specific restriction so they could be identified

and addressed in the layout. Another member suggested that the process should be kept simple

at this point since there was no significant demand and we shouldn’t make the process too

complex for the record keepers to program.

Len then outlined the integration roles of the record keeper and the provider for both GMWB and

GMIB products during the accumulation and income election phases of the products, illustrating

differences between minimum and full integration within the model. It was noted that record

keepers will have different opinions about the level of service integration and the models are

intended to accommodate different preferences. (See PowerPoint Presentation #2 for diagrams

and details).

Larry referenced the purpose and function of the “Provider Requirements Grid” (copy attached)

and walked through the various categories. He asked the providers to populate the grids. The

information will be consolidated and then used to determine the standards for each data field in

the layouts.

IV. Provider Traded Service Model

Michele Thurston of Great-West Retirement Services and Mike Oler of MetLife outlined the

workflow, service integration options and data layouts for Fixed Income and GMWB products

under the Provider Traded Service Model. (See PowerPoint Presentation #2 for diagrams and

details).

V. Guarantee Administrator Service Model

James Sprague and Jim Brackett of Milliman provided a similar workflow review of the

Guarantee Administrator Service Model. They also outlined the integration process for GMIB

and GMWB products during both the accumulation and income election phases. (See Power

Point Presentation #2 for diagrams and details). A question was raised about fiduciary issues and

James noted that the record keeper does not accept fiduciary risk in the Guarantee Administrator

model.

VI. Open Discussion and Wrap-Up

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In the subsequent discussion, one member suggested that we add a “Definition of Terms” or

glossary for the products and data elements. Another suggestion was made to consider

developing standard service agreement templates for each service model.

Two of the record keeper members indicated that they probably will not begin to build out any

systems until there is more demand for the products. Both indicated that if a large client(s) came

to them and requested a lifetime income product that they would probably build to the standards

to accommodate the request(s). Both also indicated that there is support for The SPARK Institute

initiative in order to set the stage for when there is more product demand.

In closing, Larry noted that it is important to get at least high level feedback from the record

keepers about the layout so far so that next steps could take that input into account. He then

outlined a list of items requiring follow up and the timeline (attached). Based on discussion and

comments about getting input from record keepers, the group recommended that more time

should be provided for under the proposed timeline. Larry noted that we need to balance the

importance of assuring that whatever we release to the public is technically sound and as

complete as possible with the interest in developing and releasing the standards as quickly as

reasonably possible.

Larry summarized the agreed upon next steps and deliverables as summarized below:• Identify any new product or data fields that need to be added (Full Task Force).• Update the service integration grids (Steiner and Thurston).• Develop a protocol and codes for common restrictions/rules (Providers).• Populate the data requirements grid (Providers).• Identify any questions about specific fields in the data records (Full Task Force). • Revisit variable vs. fixed length field file layout convention (Full Task Force).• Develop common terminology for various records/fields (Full Task Force).• Indentify any missing data elements for portability records.• Consider developing service agreement template (Full Task Force).• Consider whether additional fields for disclosure of product assumptions are needed or if that

can be handled separately outside of data feeds between parties.• Request record keeper feedback on potential usage of various elements and service

integration features (Goldbrum/Full Task Force).• Media Release – Include in future media release that the standards were developed based on

input from members and non-members, and consider their products and those they are

collectively aware of. Encourage input from non participating companies.

Larry said there would be a conference call the following day to debrief on issues raised during

the meeting and refine next steps. There being no further discussion, the meeting was adjourned.

Attendees

Rachel Kugelmass, ACS

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4

Jeff Eng, Alliance Bernstein

David Hayes, Delta Data Software

Bob Reiter, DST Systems

Bret Worley, DST Systems

Chris DeWitt, Fidelity

Fred Conley, Genworth

Mike Westhoven, Genworth

Bill Harmon, Great-West Retirement Services

Joan McDonagh, Great-West Retirement Services

Michele Thurston, Great-West Retirement Services

Robert Chamerda, Guardian Life

Pat Harris, Hartford Life

Chris Lunsford, Hartford Life

Phyllis Epstein, ING

Tom Roberts, ING

Suleiman Valjee, ING

James Malin, John Hancock

Edward Cronin, J.P. Morgan

Theresa Becker, Lincoln Financial

Mike Oler, MetLife

Jim Brackett, Milliman

James Sprague, Milliman

Kim Bullock, New York Life

Keith Hylind, OppenheimerFunds

Len Steiner, Prudential

Susan Unvarsky, Prudential

Debbie Hettler, SunGard

Lori Weesner, SunTrust

Jeff Close, The SPARK Institute

Larry Goldbrum, The SPARK Institute

Ralph Sanna, TIAA-CREF

Larry Massaro, Vanguard

Don Stroube, Wachovia

The SPARK Institute Antitrust Notice

The SPARK Institute is committed to strict compliance with antitrust laws. Meetings conducted by The SPARK Institute are intended to provide a forum for the exchange of information and expression of various points of view on the topics discussed during such meetings. Under no circumstances shall Institute meetings be used as a means for competing companies or firms to reach any understanding, expressed or implied, which restricts competition or in any way impairs the ability of members to exercise independent business judgment regarding matters affecting competition. Accordingly, appropriate objection will be made to any presentation or discussion that presents a risk from the standpoint of the antitrust laws.

CONFIDENTIAL



Lifetime Income Solutions

Task Force Meeting

April 20, 2010

2SHAPING AMERICA’S RETIREMENT

Task Force Member Firms

ACS

Alliance Bernstein

American Funds

AXA-Equitable

Deloitte

Delta Data Software

Diversified

DST Systems

Enterprise Iron

Fidelity

Genworth

Great West Retirement Services

Guardian Life

Hartford Life

ING

InvestLink

John Hancock

J.P. Morgan

Lincoln Financial

Mercer

MetLife

Milliman

New York Life

Oculus Partners

OppenheimerFunds

Pershing

Prudential

SunGard

SunTrust

TIAA-CREF

Vanguard

Vertical Management Systems

Wachovia


Provider Team Member

Firms and Participants

Alliance Bernstein – Jeff Eng

AXA-Equitable – Keith Namiot

Genworth – Mike Westhoven

Great-West Retirement Services – Michele Thurston

Hartford Life – Kelly Hewes

ING – Jacqueline Jarboe

MetLife – Mike Oler

Milliman – James Sprague and Jim Brackett

Prudential – Len Steiner and Susan Unvarsky

TIAA-CREF – Ralph Sanna

Wachovia – Don Stroube


Scope of Initiative

• Develop information sharing standards and file layouts that willprimarily facilitate:

– Maintaining one or more products on the record keeping system ofindependent customer-facing record keepers.

– Portability of products when the plan sponsor changes plan record keepers (“record keeper portability”).

– Rollovers to an IRA when a participant has a distributable event(“rollover portability”).


Scope of Initiative

• The standards and layouts should be flexible and accommodate as many products and services as reasonably possible, but still maintain a reasonable degree of certainty so there are reliable common standards among users.

• The standards and layouts may also be designed to help facilitate enrollment, cancellation, communicating participant guarantee history, and modeling, to the extent reasonably feasible as determined by the working team.


Scope of Initiative

• The standards and layouts will not be specifically developed to facilitate “insurance company portability,” i.e., where a plan decides to leave one insurer and move to another, and wants to have the successor insurer assume the liabilities of its predecessor. However, this issue will be revisited by the working team in order to determine whether standards and layouts that are otherwise developed can accommodate this without significant additional effort or delay.


Milestones

• Identify and define products that are in scope and not in scope.

– See Product Definitions Summary Chart.

• Identify and define industry service models covered by the standards and layouts.

– Record Keeper Traded Model.

– Provider Traded Model.

– Guarantee Administrator Model.


Milestones

• Identify, define and logically organize the universe of information, transactions, and events that require information sharing.

– Data records defined for each service model.

• Identify data elements to be included in each data record.

– See draft of data layouts.

• Develop standards, definitions and protocols for all data records and data elements.

– See draft of data layouts (in process).


Proposed Meeting Objectives

• Level set Task Force members knowledge and understanding of:

– The Structure of Data Layout Standards document.

– How each Service Model works and the products they cover, their similarities and key differences.

– How the layouts and records are used for each Model, including the similarities and differences in how and when they are used.

• Get initial feedback from Task Force members on proposed structure and direction of initiative.


Proposed Meeting Objectives

• Get commitment from record keepers to provide detailed written comments and feedback on materials within an agreed upon timeframe after today’s meeting.

• Review proposed timeline and next steps.

• Other objectives?


Data Layouts

• Part 1 – File Layout Conventions and Data Sharing

– Comparable to 403(b) Best Practices protocols.

– Header and trailer records.

– File naming conventions and related codes.

– Still under development.

– Secondary at this stage relative to substantive issues.

• Part 2 – Record Keeper Traded Service Model

– Based on the mutual fund model for record keeping and trading. Products with a daily unit value and few restrictions can work easily within this framework.


Data Layouts

• Part 3 – Provider Traded Service Model

– Based on the self directed brokerage concept for record keeping and trading. Income products that are valued by the carrier and maintained as a standard investment option work best in this model. The investments are not actually held in a brokerage account under this model.


Data Layouts

• Part 4 – Guarantee Administrator Service Model

– Similar to the Record Keeper Traded Service Model, with assets held and traded by the Record Keeper, except that the Guarantee Administrator manages pool of reinsurers. Guarantee can be applied to one or more funds or to entire participant account. Alternative workflows can be supported.


Products

• Guaranteed Minimum Withdrawal Benefit (GMWB):

– Daily valued and traded investment with a unit value and accountbalance.

– At income election, assets stay with the record keeper and plan with record keeper administering guaranteed payments.

• Guaranteed Minimum Income Benefit (GMIB):

– Daily valued and traded investment with a unit value and accountbalance .

– At income election, assets leave the plan and move to carrier for all administration (annuitization).


Products

• Deferred Fixed Income Annuity:

– Daily valued and traded investment with a $1.00 unit value and account balance calculated by the carrier .

– At income election, assets leave the plan and move to carrier for all administration (annuitization).


The SPARK Institute is committed to strict compliance with antitrust laws. Meetings conducted by The SPARK Institute are intended to provide a forum for the exchange of information and expression of various points of view on the topics discussed during such meetings. Under no circumstances shall Institute meetings be used as a means for competing companies or firms to reach any understanding, expressed or implied, which restricts competition or in any way impairs the ability of members to exercise independent business judgment regarding matters affecting competition. Accordingly, appropriate objection will be made to any presentation or discussion that presents a risk from the standpoint of the antitrust laws.

SPARK Institute Antitrust Policy Notice


Record Keeper Traded Model Workflow

Lifetime Income SolutionsRecord Keeper Traded Model Integration

Comparison of supported activities for a GMIB and GMWB products at a minimum and full integration within the Record Keeper Traded Service Model.

R=Done by record keeper P=Done by Provider (Insurer) Mutual Fund

Accumulation: Min Full Min Full

Holds plan assets R R R R R

Holds daily NAV & trades/settles T+1 R R R R R

Supports Contributions/Transfers/Exchanges/Loans/Hardships(Trading restrictions similar or same as mutual fund)

R R R R R

Participant transaction servicing R R R R R

Call center supports product questions R P R P R

Provides participant data & transactions R R R R

Calculates and provides guarantee P P P P

Guarantees displayed on statements P R P R

Guarantee posted on web with account value P R P R

Income Election:

Distribute plan assets R R N/A N/A

Holds daily NAV & trades/settles T+1 N/A N/A R R

Liquidity (Same as accumulation but subject to benefit reduction) N/A N/A R R

Participant transaction servicing to include payments N/A N/A R R

Provides participant data & transactions N/A N/A R R

Calculates and provides guarantee N/A N/A P P

Guarantees displayed on statements N/A N/A P R

Guarantee posted on web with account value N/A N/A P R

Call center supports product questions N/A N/A P R

GMIB GMWB

Integration Integration


Provider Traded Model Workflow

Product Specific Information/Guaranteed Values–

Participant Level 3.3Daily Net Position (Fund/Plan Level)-

File 3.8Daily Error Transactions 3.11

Indicative and Financial Data- 3.1Plan Totals/Reconciliation (Plan Level Data)

3.7

Financial Transactions

Single Sign-on or Inquiry of Product

InformationEducation and Modeling tools

Detailed transaction information by fundInquiry of guaranteed product information

Guaranteed Fund Trading

Participant InquiryAccount balances (aggregate for Guarantee

funds)Account Activity (Transfers, Contributions, Withdrawals, etc)

Record Keeper

Participant InstructionsSet allocation to Guarantee ‘bucket’Transfer into/out of Guarantee ‘bucket’Initiate loans and disbursementsUpdate indicative dataIncome election

Provider

Initiate Income ElectionTransfers Out

Trading: - Provider handles any associated trades or investing of the funds of the guaranteed income product . - Revenue sharing may be passed through to record keeper depending upon the product.- Provider calculates the market value and sends this information to the record keeper daily.

Guaranty: - Record keeper provides participant detail data to Provider daily, including participant transactions and indicative data. - The file may include data for multiple plans.- Provider calculates the guarantee and may send this information to the Record keeper daily.

Comparison of supported activities for Fixed and GMWB products at a minimum and full integration within the Provider Traded structure

R=Done by record keeper P=Done by Provider (Insurer)

Lifetime Income SolutionsProvider Traded Model Integration

Accumulation: SDB Min Full Min Full

Holds plan assets R R R R R

Daily traded/settled T+1 using insurer market value R R R R R

Maintains NAV or age-based prices & calculates daily market value R P P P P

Supports Contributions/Transfers/Exchanges/Loans/Hardships(Trading restrictions similar or same as mutual fund or SDB)

R R R R R

Participant transaction servicing R R R R

Provides participant data & transactions R R R R

Calculates and provides guarantee P P P P

Guarantees displayed on statements P R P R

Guarantee posted on web with account value P R P R

Single sign-on to insurer web to display guaranteed income detail R R R R

Call center supports product questions P R P R

Income Election:

Distribute plan assets R R N/A N/A

Daily recordkeeper traded/settled T+1 N/A N/A R R

Maintains NAV or age-based prices & calculates daily market value N/A N/A P P




Calculates and provides guarantee N/A N/A P P

Guarantees displayed on statements N/A N/A P R



Fixed GMWB


Fund Manager

(may or may not be affiliated with RK or

Insurer)

Record keeperPlan Sponsor/

Participant

Reinsurer 1

Lead Insurer

Participant Guarantee Values (optional)

NSCC or DirectTrade/

Settlement

Insurer and Reinsurance Pool

Participant Indicative and Transaction Data

Omnibus Trade

Trading: - Record keeper trades one or more mutual funds via NSCC.- Revenue sharing with underlying fund may be passed through to record keeper.

Guaranty: - Record keeper provides participant detail data to Guarantee Administrator daily, includes participant transactions (values, types) &personal data. Direct, Single File – can include multiple plans.

- Guarantee administrator optionally calculates and makes guarantee available to record keeper (Daily- Monthly). Record keeper can calculate and send copies to guarantee administrator, who monitors/audits calculations.


Guarantee Administrator Model Not Showing Separate Account

Guarantee Administrator

Reinsurer 2

Reinsurer n

Modeling/Projection Queries/Results

Reports(not standardized)

Participant Data for Marketing or Additional

Hedging (optional)

Fund Manager

(may or may not be affiliated with RK or

Insurer)

Record keeperPlan Sponsor/

Participant

Reinsurer 1

Lead Insurer

Participant Guarantee Values (optional)

NSCC or DirectTrade/

Settlement

Insurer and Reinsurance Pool

Participant Indicative and Transaction Data

Omnibus Trade

• Record keeper trades one or more mutual funds via NSCC • Revenue sharing with underlying fund may be passed through to record keeper

• Record keeper provides participant detail data to Guaranty Administrator daily, includes Participant Transactions (Values, Types) & Personal Data. Direct, Single File – can include Multiple Plans

• Guarantee Administrator optionally calculates and makes guarantee available to record keeper (Daily-Monthly). (RK can calculate and send copies to GA, who monitors/audits calculations)

Trading:

Guarantee:

Guarantee Administrator

Reinsurer 2

Reinsurer n

Modeling/Projection Queries/Results

Reports(not standardized)

Participant Data for Marketing or Additional

Hedging (optional)

Separate Account

(Collateralized Obligations

and Hedges)

Fees after RK share

Collateral Required from Insurers

Profit Above Collateral Requirements

Trade Instructions for Hedging and Profit Release

Collateral RequirementsGuarantee Administration

Fee


Guarantee Administrator Model with Separate Account and Fees

Lifetime Income SolutionsGuarantee Administrator Traded Model Integration

Comparison of supported activities for a GMIB and GMWB products at a minimum and full integration within the Record Keeper Traded Service Model.

R=Done by record keeper P=Done by Insurer/Guarantee AdministratorMutual Fund

Accumulation: Min Full Min Full

Holds plan assets R N/A N/A R R

Holds daily NAV & trades/settles T+1 R N/A N/A R R

Supports Contributions/Transfers/Exchanges/Loans/Hardships(Trading restrictions similar or same as mutual fund)

R N/A N/A R R

Participant transaction servicing R N/A N/A R R

Call center supports product questions R N/A N/A P R


Calculates and provides guarantee N/A N/A P/R P/R

Guarantees displayed on statements N/A N/A R R


Income Election:

Holds daily NAV & trades/settles T+1 N/A N/A R R



Distribute guarantee payments after participant exhausts assets N/A N/A P R

Calculates and provides guarantee N/A N/A P/R P/R

Guarantees displayed on statements N/A N/A R R

Guarantee posted on web with account value N/A N/A R R


GMIB GMWB


The SPARK InstituteLifetime Income Solutions Initiative

Preliminary Timeline

Task/Milestone Start Date End Date Complete Assigned To Notes

Full Task Force Meeting Tuesday, April 20, 2010 Tuesday, April 20, 2010 100% All

Conference call to debrief

from 4/20 meetingWednesday, April 21, 2010 Wednesday, April 21, 2010

Providers

and Others4/21 - 1:00-2:30 Eastern.

Revisions to materials

based on 4/20 meetingWednesday, April 21, 2010 Wednesday, May 19, 2010

Working

Teams4 weeks

Provide advanced copy to

certain other trades and

non-members for

comment

Wednesday, April 28, 2010 Friday, May 07, 2010 GoldbrumIRC, DCIAA, end date is when comments

are due back from reviewers

Conference call to review

comments from other

trades, etc

Monday, May 10, 2010 Monday, May 10, 2010Providers

and OthersGoldbrum to schedule


based on comments from

traced and others

Monday, May 10, 2010 Wednesday, May 19, 2010Providers

and Others

Completion date same as date for changes

from 4/20 meeting.

Distribute revised

materials to full Task

Force and Board

Thursday, May 20, 2010 Thursday, May 20, 2010 Goldbrum

Member review of

revised materialsThursday, May 20, 2010 Tuesday, May 25, 2010 Members Comments due by end date - 1 week


based on final commentsWednesday, May 26, 2010 Friday, May 28, 2010

Providers

and Others3 days.

Release Materials for

public review and

comment

Monday, May 31, 2010 Monday, June 21, 2010 Goldbrum Comments due on end date - 3 weeks

Conference call to discuss

public commentsTuesday, June 22, 2010 Tuesday, June 22, 2010 TBD Goldbrum to schedule

CONFIDENTIAL

The SPARK InstituteLifetime Income Solutions Initiative

Preliminary Timeline

Task/Milestone Start Date End Date Complete Assigned To Notes

Revisions to reflect public

commentsTuesday, June 22, 2010 Wednesday, July 07, 2010 TBD

Final Review by members Thursday, July 08, 2010 Thursday, July 22, 2010 Comments due by end date - 2 weeks

Public Release of Final

VersionMonday, August 02, 2010 Monday, August 02, 2010

CONFIDENTIAL

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