Filed Under:Annuities, Suitability

Senate panel clears retirement savings bill

Among other things, the legislation would help employers design stronger employee retirement plans

The proposed legislation is meant to increase Americans' retirement savings and access to lifetime income solutions. (Photo: iStock)
The proposed legislation is meant to increase Americans' retirement savings and access to lifetime income solutions. (Photo: iStock)

WASHINGTON — A Senate panel Wednesday reported out bipartisan legislation aimed at enhancing the ability of Americans to save for retirement.

See also: Bankrate survey: Retirement savings at record levels

Key provisions include one that would ease the ability of small firms to join with other firms in creating retirement plans by reducing duplicative filing, and a second that would encourage plan sponsors to include lifetime income products in their retirement plan offerings.

The legislation is the Retirement Enhancement and Savings Act of 2016.

It was lauded by two industry groups, the American Council of Life Insurers and the Insured Retirement Institute. It was reported out of committee by a 26-0 vote.

The bill "provides practical solutions for Americans’ retirement security challenges,” said Dirk Kempthorne, ACLI president and CEO.

Kempthorne noted that, “Every day between now and the year 2030, 10,000 people will reach age 65. American workers should have greater access to employer plans to help them save for their retirement. They need education about their savings and access to lifetime income solutions.”

See also: Options are the future of retirement planning

Cathy Weatherford, IRI president and CEO, said the legislation contains many of the same policy solutions that IRI has “long espoused” to enhance retirement security for millions of Americans.

She cited provisions that provide clear rules to plan sponsors to encourage the inclusion of lifetime income products in workplace plans, including a requirement that lifetime income estimates on retirement plan statements.

The other key provision encourages and helps employers not yet prepared to sponsor their own retirement plans to join together to achieve economies of scale and receive advantages with respect to plan administration. It is focused on helping small businesses looking to offer retirement plans to their employees and sole-proprietors.

Kemptorne and Weatherford said the provisions have broad bipartisan support. However, time is short, given the fact that the House will only be in session until Sept. 30, not returning until Nov. 14, after the elections. The Senate will be in session Oct. 7, returning the same day in November.

See also: Retirement expectations vs. reality: survey flags disconnect

Other provisions of the bill would clarify the current annuity schedule life harbor and provide portability for lifetime income products. This provision permits participants to roll over lifetime income options to an IRA that provides the same or similar lifetime income protection in the event they retire, or the company that work for goes out of business or merges with another company.

According to the ACLI, the annuity selection safe harbor provision addresses a key employer concern with respect to adding an annuity option to a retirement plan. According to ACLI officials, the provision requires the employer to still “prudently” select a provider and an annuity, when considering an insurer’s financial capability, employers will be able to rely on specific representations from the insurer regarding the plan’s status in relation to state insurance regulation and enforcement.

Sponsors of the original bill are Sens. Orrin Hatch, R-Utah, and Ron Wyden, D-Ore., although some provisions were proposed by other senators.

Kempthorne said Hatch had introduced legislation in the last Congress on the safe harbor clarification and portability.

He said these provisions “are particularly timely” as they address concerns raised in a new General Accounting Office report that recommends steps the Department of Labor can take to improve lifetime income options for plan participants.

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Nichole Morford

Nichole Morford
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