NEW LEGISLATION WOULD ALLOW LIFETIME INCOME PRODUCTS AS DEFAULT RETIREMENT PLAN INVESTMENT

Measure Offers Retirement Savers Improved Ability to Generate Protected Income Stream

WASHINGTON, D.C. – Bipartisan legislation to eliminate a barrier preventing lifetime income products as default investment choices in retirement plans was introduced today.

The Lifetime Income for Employees Act, introduced by Rep. Donald Norcross (D-N.J.) and Rep. Tim Walberg (R-Mich.), would allow retirement plan sponsors to use lifetime income solutions as qualified default investment alternatives (QDIA) for a portion of contributions made by participants who have not made investment selections. The Insured Retirement Institute (IRI) supports the legislation.

QDIAs, created by the Pension Protection Act of 2006, have proven to be an essential tool to enhance retirement security by providing retirement savers with the ability to accumulate assets without needing to make underlying investment selections inside of their workplace retirement savings plan.

Paul Richman, IRI Chief Government and Political Affairs Officer said, “This bill would help address the insecurity and anxiety workers and retirees across America are feeling today about their ability to accumulate sufficient savings to provide them with income that will last throughout their retirement years.”

A survey of voters aged 25-plus conducted by the American Association of Retired Persons (AARP) showed that more than six in 10 (63 percent) are anxious about whether they will have enough money saved to live comfortably throughout their retirement years.

IRI’s consumer research shows significant interest in protected lifetime income solutions, such as annuities, among workers. IRI found that nearly eight in 10 workers would likely allocate a portion of savings to an in-plan annuity with a lifetime income guarantee. Almost 90 percent believe protected lifetime income is important.

Under the bill, the current QDIA safe harbor regulations would be amended to allow, but not require, a QDIA to include a limited investment in a non-liquid annuity component, which provides a guaranteed return on investment. Plan sponsors would not need to make any changes to their current QDIA.

“Current Department of Labor regulations governing QDIAs have created a barrier to using certain investments – including protected lifetime income solutions like annuities – that do not meet specific liquidity requirements,” Richman said. “The regulations have created an environment where savers who utilize their plan’s QDIA only invest in vehicles that build assets and contain no mechanism to convert those assets into guaranteed income during their retirement years.”

The Department of Labor issued an information letter in 2016 that makes clear an investment with an annuity component can be offered consistent with a plan sponsor’s fiduciary duty. However, the current QDIA safe harbor regulation would not allow the investment to serve as a QDIA.

“This legislation would simply update regulations to reflect innovations in retirement security investment products,” Richman added. “The solution provided by the Lifetime Income for Employees Act will significantly increase access to and the use of protected lifetime income products to help retirement savers produce sustainable income during their retirement years.”

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Contact: Dan Zielinski