The latest version of a bipartisan bill would allow retirement plan sponsors to use annuities as qualified default investment alternatives (QDIAs).
Rep. Donald Norcross (D-NJ) and Tim Walberg (R-MI) reintroduced H.R. 3942, the latest version of the Lifetime Income For Employees (LIFE) Act on Friday. Designed to help Americans achieve a guaranteed, steady income throughout retirement, the legislation would permit annuities to be the default 401(k) investment option for workers enrolled in an employer-sponsored 401(k) plan and would soften access rules on annuities as QDIAs.
The bill would allow up to 50% of a participant’s contribution to be utilized in an annuity, to ensure that savings are invested in a diversified portfolio with liquid funds. It would also allow 401(k) participants to opt out of the annuity within six months of being defaulted. After that, opting out would be more difficult and may even incur annuity surrender charges depending on the contract.
The bipartisan legislation would also amend current Department of Labor (DOL) regulations that define QDIAs, in an effort to encourage more employers to offer annuities.
The bill has seen approval in the past from industry leaders and houses, and proved no different when it was reintroduced this time around. In a statement, TIAA urged Congress to pass the Act, noting that the bill limits prior hurdles to annuity access.
“Through essential reforms to existing rules around retirement plan default investment options, the bill removes unnecessary barriers to allow more retirement plans to include certain types of annuities that can provide higher returns, alongside existing default annuity options,” said Colbert Narcisse, chief product and business development officer. “The result: more retirement savers will have access to ‘pension-like’ annuities as part of their employers’ default retirement offerings, affording sustainable, guaranteed income throughout retirement.”
Reps. Norcross and Walberg originally introduced the bill in 2020 and then again in 2022, before reintroducing it for a third time last week. Prior to its reintroduction, the LIFE Act was considered for inclusion in last year’s SECURE 2.0 Act but was left out of the legislation’s final language. The bill will now go to the House Committee on Education and the Workforce, where Norcross and Walberg both serve together in.
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