With many employees relying on defined contribution savings as their primary source of retirement income, Retirement Annuity Accounts (RAAs) offer employers a benefit plan option to provide employees guaranteed retirement income on an annuity basis.​

1. Retirement Annuity Accounts
(RAAs)
Retirement for the Future
March 2016

2. As employers move from providing
defined benefit plans to defined
contribution plans, there is a void for
employees’ retirement security.
As employers and employees strive to
balance risk and long-term fiscal goals,
an opportunity to leverage the expertise
of insurance companies and other
annuity providers has emerged.

3. Current Retirement
Market

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The shift from defined benefit to defined contribution
plans potentially creates a void for retirement security
72% of employers feel only some employees will be ready for retirement1
Over 85% of Americans believe the nation is facing a retirement crisis2
Only 24% of Fortune 500 companies offered a defined benefit plan to new hires at the end of 2013, down
from 60% just 15 years earlier3
1 2014 US Annual Defined Contribution Benchmarking Survey, Deloitte.
2 National Institute on RetirementSecurity,“New reportfinds 86 percentof Americansbelieve nation faces retirementcrisis,”Business Wire,March 5, 2015
3 TW analysis of 2013 Fortune 500
Market Fluctuations & Low Interest Rates
Employers have faced significant volatility and
increased financial burden impacting their ability to be
financially stable
Freezing & Terminating Defined Benefit Plans
As a response to market conditions, employers have
shifted to defined contribution arraignments to reduce
risk and liability on the books
EmployerEmployee
Increased Responsibility for Retirement
Employees have had to be more active in saving and
planning for retirement
Increased Retirement Risks
Defined contribution arrangements cause employees to
take on longevity risk, investment risk, and tax risks.
Employers expertise is in running their business not DB plans
Employees aren’t well equipped to take on these risks
Employers are looking for solutions that help manage risk

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Employees may be at risk of being unprepared for their
own retirement
Employees are being driven to take an active role in their own retirement planning…
…however, most employees are not adequately prepared for retirement
49%
Nearly half of
employees do not
have a formal
retirement plan1
43%
Don’t understand
what they need to do
to plan for retirement1
43%
Almost half of employees
will be unable to cover
expenses within 20 years
of retirement2
1 DeloitteCenter for FinancialServices,“Making RetirementSecurity a Reality”;
2 Employee Benefit Research Institute, “Short falls: Who’s most likely to come up short in retirement, and when?,” June 2014
Insurance companies or annuity providers already provide expertise in managing risk
for every other benefit including property, health, disability, and death, making them
well-positioned to manage retirement risk as well.
46%
Most people do not
feel secure about
retirement1

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6
Longevity risk faced by employees is a big concern
for employers
According to the ERISA Industry Committee Survey on Longevity solutions in Defined Contribution
Plans, employers are concerned about longevity risk faced by their employees
Source: ERISA Industry Committee Survey on Longevity solutions in Defined Contribution Plans
90%
Employers are
somewhat or very
concerned about
longevity risk faced by
their employees
66%
DC plans that have no
annuity options
available in the plan
Based on Deloitte experience and the survey results, employers want to
provide solutions to help employees with the longevity risk.
35%
Of employers are
considering adding
features aimed at
helping employees with
longevity risk over the
next 3 years

7. Retirement Annuity
Accounts (RAAs)

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Retirement Annuity Accounts can provide an income benefit without the investment
management responsibilities for employers or employees
Aggregated Year
Over Year
Providing DB type
benefit for DC level of
risk
Employer
Contribution
Converted to Annuity
Beginning at Age 45*
Each year, employers
provide a pre-tax
contribution on behalf of
the participant to an
employer controlled
investment account.
Contributions made prior
to age 45* will
accumulate each year
similar to a defined
contribution plan based
on investment directed by
the employer. It could be
directed in stable value or
index funds type
investment.
Balances are tracked by
employee.
Beginning when a participant reaches age 45,
employers automatically convert a portion of
remaining balance to an annuity. The minimum
value converted is the account balance times one
over the remaining years until the participant’s
Normal Retirement Age.
Annual contributions made after age 45 will
immediately convert into annuities.
Annuities are payable at Normal Retirement Date
and priced based on:
• Market interest rates
• Mortality
• Participant’s age
Employers can choose from a number of credit
worthy annuity providers. Utilizing 95-1 rules on
annuity selection is recommended.
Annuities can be added up
year over year and tracked
by the employee or
employer.
Employees would maintain
relationships with annuity
providers in a similar
manner as they currently
do with retirement
providers.
Employers can assist employees in
having a sufficient source of secure
and predictable income at
retirement while managing
administrative, compliance and
investment risk burden and cost
volatility for a more portable
workforce.
For employees under 45, they will
have their assets in a account
balance that can be rolled over.
Potentially reducing the burden on
employees of managing
investment, longevity, and tax risk.
* Based on the pricing from insurance company actuaries and the length of time to average interest
rates (20 years), age 45 would be the optimal age for annuity pricing and managing interest rate risk.
Retirement Annuity Accounts provide defined benefit-type
features without the investment risk and compliance
requirements of a defined benefit plan

9. Why RAAs for Employers

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As risk and money management experts, insurance companies or annuity
providers are well-positioned to help solve the retirement crisis
Risks employers assume when administering traditional
retirement plans are mitigated by RAA benefit provisions
Plan Type Risks and Challenges Why RAAs Are Different
Defined Benefit
Plans
• Employers are not in the business of managing
individuals money and risk
• Strict compliance requirements and industry-
specific regulations drive assumptions and funding
requirements
• Benefits are not portable
• Employers outsource the risk management to experts while still
being able to provide a paternalistic style retirement benefit
• Annuities purchased on a set periodic basis and price reflects
current market conditions at that time
• Annuities are owned by the employee, not employer
• DC balances are not converted into annuities until age 45,
providing portable benefits
Defined
Contribution
Plans
• Employees retain longevity and investment risk
• Employees must actively manage
• Help to provide secure, predictable retirement income
• Help to reduce employees’ investment and longevity risk
• Help to reduce decision on “right time” to purchase annuity within
DC plan
Annuity
Purchases
• Since there is no marketplace, pricing is not
competitive
• Value of annuity is calculated at a specific point in
time and does not provide safeguards for future
interest rate fluctuations
• Creation of a competitive marketplace
• Total retirement annuity is bought in tranches over a specified
period, so that fluctuations in market conditions level out

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A detailed analysis of the pros and cons can help
determine the best option to provide employee benefits
Plan Type Pros Cons
Stick to current
DB plan
approach
• No change to current employee benefit so
employees are not better or worse off
• Opportunity for Deloitte to potentially lower cost of
providing benefit with higher returns
• May help certain non-discrimination tests
• Employer will likely continue to take on longevity, investment and
other compliance related risks
• Employer will need to manage volatility risk
• Employer will likely have administrative costs (ex. PBGC
premiums, actuarial valuations etc.)
Move to a
traditional
Defined
Contribution
plan approach
• Can provide complete portability of benefits for
employees
• Can provide for a predictable contribution amount
for employers
• Gives employees ability to make investment
choices
• Employees will need to manage investment and longevity risk
• Employee will need to help ensure retirement savings are
sufficient for retirement
• Less lifetime income options available
• If annuity option is available, there could be potential risk of
choosing the “right time” to purchase annuity within DC plan
Move to
Retirement
Annuity
Accounts
• Plan can be designed to provide similar lifetime
benefits as current DB plan
• Longevity and investment risk not borne by
employer or employee
• Provides portability of benefits prior to retirement
age 45 and portability starts to decrease after that
• Ability to mitigate interest rate risk
• Can be more costly due to shift of risk from ER/EE to insurance
company
• Depending on investment choices gain can be lower due to low
risk/principal preservation strategies
• In low interest rate environment, the purchase of annuities may
be perceived negatively
• Employee has no investment options

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related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services.
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