Lawmakers have introduced two separate bills aimed at bolstering retirement savings: one would allow plan sponsors to provide annuities as the default option in defined-contribution plans, and the other aims to increase participation workers in retirement plans.
Representatives Donald Norcross, D-New Jersey, and Tim Walberg, R-Michigan, reintroduced the Employees Lifetime Income Act 2022which would allow pension plan sponsors to offer annuities as the default option in their DC plans.
The proposed legislation includes provisions that require plan sponsors to provide members with information about what annuities are, how they work, and how they can get additional information about their investment alternatives. In addition, plan sponsors would not be permitted to allocate to the annuity contract more than 50% of any periodic contribution, or 50% of the value of account assets immediately following a rebalancing of investments.
“The number of private sector workers receiving lifetime benefits from a traditional defined benefit pension plan has fallen from 60% in the 1980s to just 4% today,” Norcross said in a statement. “By creating ‘individual pensions,’ this legislation will provide hard-working Americans with a guaranteed income.”
A recent report of the nonprofit National Retirement Security Institute said that although annuities “tend to be expensive” due to low interest rates, insurer profits, and marketing and administration, “the greatest potential for improving the DC plan experience for participants lies in determining one of the safe and cost-effective ways to generate post-retirement income.
The bill has been endorsed by the American Council of Life Insurers, whose president and CEO, Susan Neely, said in a statement that “changing the current rules for qualified default investment alternatives to facilitating the use of an annuity component will expand the availability of guaranteed and guaranteed returns”. income for life.
Meanwhile, Sen. Tim Kaine, D-Virginia, and Rep. Kathy Manning, D-North Carolina, introduced the Automatic Re-enrollment Act of 2022, which aims to increase workers’ participation in workplace pension plans by encouraging pension plans to automatically re-enroll workers. It aims to increase auto-enrollment participation by changing the exemption rules in the Employee Retirement Income Security Act and the Internal Revenue Code to encourage plan sponsors to re-enroll non- participants at least once every three years, unless they choose to withdraw again. .
The bill’s sponsors say the legislation aims to get workers who initially opted out of automatic enrollment in their employer’s pension plan to reconsider and join. They quote Data from the Bureau of Labor Statistics that show that only 51% of private sector workers participate in employer-sponsored retirement plans, and say the bill would allow more workers to benefit from employer matching.
“Almost half of all private sector workers are deprived of the benefits of their employer-sponsored pension plan and employer matching contributions,” Manning said in a statement. “The years employees work without earning those savings could have a big impact on their retirement.”
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Tags: 401(k), annuities, Auto Reenroll Act, Automatic Enrollment, Defined Contribution, Donald Norcross, Kathy Manning, Lifetime Income for Employees Act, retirement plan, Tim Kaine, Tim Walberg