HELP Subcommittee Explores Annuity Usage in DC plans
The Health, Employment, Labor, and Pensions (HELP) Subcommittee on Wednesday held a hearing to debate lifetime income options in retirement plans and whether policymakers should consider potential legislation that would promote the tools.
HELP Subcommittee Chairman Rick Allen (R-GA) began the hearing by acknowledging the impact of defined contribution (DC) plans to private sector workers, adding that of the 837,000 employer-sponsored retirement accounts today, 755,000 are DC plans with over 121 million participants and more than eight million dollars in assets.
Chairman Allen proposed further advancing the success of DC plans with annuity tools. Findings from the National Bureau of Economic Research in 2025 found that defaulting 20% of a retiree’s assets into an immediate annuity could help with retirement security during plan payouts.
“Congress recognizes the widespread adoption and popularity of defined contribution plans among private-sector employers and their employees,” said Chairman Allen. “As these plans have become the cornerstone of retirement security for millions of workers, there is now an opportunity to build upon this system by expanding lifetime income options.”
Industry experts testified before the House Subcommittee on the benefits or drawbacks of incorporating lifetime income options in retirement plans. Wayne Chopus, president and CEO of the Insured Retirement Institute, noted that while recent retirement legislation like the SECURE Act of 2019 and SECURE 2.0 has been impactful, further action is needed to help retirees decumulate savings to consistent pay in retirement. Implementing income solutions could help fulfill that need, he said.
He also outlined policy recommendations included in the IRI’s Federal Retirement Security Blueprint, which includes proposals on enacting guaranteed lifetime income tools. Among the suggestions are allowing annuities to be used as part of qualified default investment alternatives (QDIAs) in retirement plans, mandating that plans offer the choice to invest in lifetime income solutions, expanding the types of annuities that qualify as longevity income options, and clarifying an existing safe harbor for employers selecting annuity contracts, according to the IRI.
“These are practical, common-sense steps that build on what Congress has already accomplished,” Chopus said. “They would help workers transform their hard-earned savings into dependable ‘mailbox money’ that arrives month after month, for as long as they live.”
Solutions to close the gap
Surya Kolluri, head of the TIAA Institute, also testified in support of adopting lifetime income options in DC retirement plans. He cited past TIAA findings which show that about 45% of American households will run out of money in retirement. As participants live longer, the lack of longevity literacy, coupled with impending cuts to Social Security benefits, further emphasizes the need for retirement income products, he stated.
Kolluri also listed the current barriers that exist with expanding lifetime income access, including limited availability in 401(k) plans, fiduciary concerns from plan sponsors, knowledge gaps between participants, and restricted default options.
Kenneth E. Levine, executive director for Global Retirement Strategy at RTX Corporation, in his testimony noted hearing other plan sponsors cite fears of litigation and uncertainty in the regulatory environment as reasons for failing to implement lifetime income options.
RTX Corporation, a manufacturer in commercial aerospace and defense industries, has offered lifetime income strategies in its retirement plan since 2012.
Among Kolluri’s solutions for Congress to close the retirement income gap are establishing a menu of qualified payout options to help participants convert savings into steady streams of income; require comprehensive retirement income education; and support legislation like the Lifetime Income for Employees Act that would modernize QDIA regulations by updating current liquidity requirements. Kolluri also recommended for the Department of Labor (DOL) to develop and publish a tips document on lifetime income products in QDIAs.
“Guidance like this would help address the knowledge gap among plan sponsors and provide a roadmap for thoughtful implementation of lifetime income options in QDIA products,” Kolluri said.
‘Robust guardrails’
Lifetime income products could generate sustainable income products, but guardrails are needed to avoid unnecessary costs and risks, said Nari Rhee, director of the Retirement Security Program at the Center for Labor Research and Education at the University of California at Berkeley, in testifying. This includes incorporating prudent standards for defaulting participants into annuities, enacting cost minimization, pricing transparency, and actuarial fairness along with informed employee decisionmaking.
In her testimony, Rhee also contended that despite its success with private sector workers, the U.S. retirement system has “failed” to provide security for nearly half of U.S. workers employed in wage and salary jobs, including 79% of workers in the bottom 20% of the earnings distribution and 64% of those in the next 20%, according to findings from the Pension Research Council Working Paper.
Severe wage gaps were also reported in the findings between white and Asian households and Black and Latino households, further growing the inequality present in retirement planning and saving.
As a result, two out of five working-age households have no 401(k) or assets in individual retirement accounts (IRAs), Rhee stated.
She noted that while annuitization in DC plans is important, Congress should also consider the workers who have minimal retirement savings as a result of this inequity.
“As this committee considers potential steps to further include complex lifetime income products to 401(k) plans, I urge you to prioritize the majority of our workforce that is being failed by our retirement system, not just through lack of access to employer sponsored retirement plans, but through low wages that make it difficult to save, especially when housing, food, and healthcare are increasingly unaffordable,” concluded Rhee. “The number of workers who lack access to an employer-sponsored retirement plan, or who have barely anything saved in a 401(k), far outstrips the number of workers who have sufficient balances to receive substantial income from purchasing an annuity.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.