Bipartisan Bill to Streamline 401(k) Distribution Options, Expand In-Service Rollover Choices is Back
A bipartisan bill aimed at streamlining the 402(f) notice process and giving clearer guidance and more flexibility to Americans navigating retirement savings decisions has been reintroduced in Congress by U.S. Representatives Jimmy Panetta (D-CA) and Darin LaHood (R-IL).
The Retirement Simplification and Clarity Act, reintroduced on Nov. 26, would also expand in-service rollover options to include annuities for individuals ages 50 and older.
“Navigating the various methods of saving for retirement can get very complicated, very fast. This bipartisan bill helps Americans plan for retirement by making the process simpler and giving them more flexibility. By helping Americans make informed decisions about their savings, we can strengthen their financial security for retirement and the years ahead,” said Rep. Panetta.
Specifically, the proposed legislation would implement key recommendations from the Government Accountability Office (GAO) to streamline the complicated 402(f) notice process. A 402(f) notice is the document provided to individuals who leave an employer and request a distribution from their 401(k) plans. The notice outlines distribution options and their tax implications.
Under the bill, the IRS would be directed to redesign this notice in clear, straightforward language. The revised version would provide plain explanations of all distribution options, including rolling over savings into a new plan or leaving them in the current one, so that individuals can make well-informed decisions about their retirement funds. Additionally, the legislation would broaden in-service rollover options by allowing individuals aged 50 and older to transfer funds from their employer-sponsored 401(k) accounts into an annuity.
“Hardworking Americans planning for retirement shouldn’t have to face extraneous complications that create uncertainty about their financial future,” said Rep. LaHood. “Providing more flexibility and a better guidance during the process will help ensure Americans can properly prepare for retirement and feel confident in their decisions. I am proud to lead this bipartisan effort with Representative Panetta to help eliminate needless hurdles and reduce the confusion surrounding retirement.”
The Retirement Simplification and Clarity Act is supported by financial planning experts and retirement security advocacy organizations like the American Council of Life Insurers and the National Association of Insurance and Financial Advisors (NAIFA).
“The Retirement Simplification and Clarity Act will help ensure Americans have the information and ability to make the best decisions for their retirement,” said David Chavern, President and CEO of the American Council of Life Insurers. “As the only product that guarantees income for life, annuities play a unique and critical role in retirement planning. This important legislation will give Americans nearing retirement better information and additional options to achieve the retirement they want.”
NAIFA CEO Kevin M. Mayeux said his organization is pleased to endorse the Retirement Simplification and Clarity Act. “As the largest national association of insurance and financial advisers with members assisting hard-working, everyday Americans in all states and Congressional districts with retirement savings choices, we applaud any effort to simplify the rules for retirement savings and to enhance the ability of retirees to ensure they do not outlive their savings through guaranteed income options,” Mayeux said. “This bill will advance those worthy goals, and NAIFA looks forward to working with the sponsors to see it enacted.”
Panetta and LaHood first introduced the bill back in Dec. 2024 but did not advance out of committee. The reintroduced bill is at the committee review stage after being referred to the House Committee on Ways and Means on Friday.
SEE ALSO:
• Bipartisan Bill Introduced to Simplify Retirement Savings Distribution Options
• Lawmaker Introduces Bill Supporting Pleading Standards for ERISA Suits
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
