Bipartisan legislation meant to increase “guaranteed lifetime income products” (annuities) in 401k plans passed the House last Thursday as part of a package of three bills, collectively known as Tax Reform 2.0.
In addition to safe harbor provisions for annuity use, it would also make permanent the individual tax cuts passed last December and championed by President Trump.
“Studies have shown that Americans are not saving enough to be financially secure throughout their retirement,” according to Rep. Tim Walberg, R-Michigan, who sponsored the legislation with Rep. Lisa Blunt Rochester, D-Delaware. “Currently, only 10 percent of retirement plans in America offer a guaranteed lifetime income product—largely due to confusing and ambiguous regulations that employers must follow when selecting an insurance provider.”
To remove the uncertainty, Walberg and Blunt introduced the “Increasing Access to a Secure Retirement Act,” which was incorporated into the “Family Savings Act” passed on Thursday, and establishes specific guidelines for employers who want to include annuities on their retirement plan menus.
It says safe harbor is met if the fiduciary engages in:
- an objective, thorough, and analytical search for the purpose of identifying insurers from which to purchase such contracts;
- considers the financial capability of such insurer to satisfy its obligations under the guaranteed retirement income contract; and
- considers the cost (including fees and commissions) of the guaranteed retirement income contract offered by the insurer in relation to the benefits and product features of the contract and administrative services to be provided under such contract.
The other two bills are the “Protecting Family and Small Business Tax Cuts Act of 2018,” which would make the tax cuts permanent and the “American Innovation Act,” which would encourage Americans to start small businesses.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
