WASHINGTON – During National Retirement Planning Week, U.S. Senators Chris Murphy (D-Conn.) and Johnny Isakson (R-Ga.) reintroduced their bipartisan legislation to help Americans plan in advance and ensure they do not outlive their retirement savings. Their Lifetime Income Disclosure Act, S.868, would require 401(k) plan sponsors to inform participating workers of the projected monthly income they could expect at retirement based on their current account balance.
With the shift to 401(k) plans, American workers have become increasingly responsible for putting savings into and managing their retirement investments. However, studies have found that many Americans are not saving enough, and they are unsure how quickly or slowly to draw down their savings in their retirement years.
“People across Connecticut are losing sleep over their inability to save for retirement. It's a silent crisis in our state that not enough people are talking about,” said Murphy. “Senator Isakson and I introduced this bill to help families answer basic questions about how to save and how much to save. Our Lifetime Income Disclosure Act will help people make smarter, more informed decisions about whether or not they’re saving enough, and ensure that Connecticut families can retire with dignity.”
“American workers need access to the best available information about their investment choices and exactly how much they will have earned when they retire,” said Isakson. “This information not only helps them to plan, but promotes increased savings while they are still working. Many workers count on defined contribution plans such as 401(k)s in their retirement planning, and this legislation will encourage participants to think of their 401(k) investments as a vehicle for lifetime income.”
The Lifetime Income Disclosure Act is patterned on the Social Security Administration’s annual statements, which are mailed each year to working Americans to inform them of their estimated monthly benefits based on their current earnings. Congress mandated annual Social Security statements in 1989, and they have proven to be very useful to workers in preparing for retirement.
By providing similar information for 401(k) plans, the Lifetime Income Disclosure Act would give American workers a more complete snapshot of their projected income in retirement.
Specifically, under the Act, defined contribution plans subject to Employee Retirement Income Security Act (ERISA) of 1974 - including 401(k) plans - would be required annually to inform participants of how their account balance would translate into a monthly income stream based on age at retirement and other factors.
To ensure there is no material burden or potential liability on employers who voluntarily sponsor 401(k) plans, the legislation directs the Department of Labor to issue tables that employers may use in calculating an annuity equivalent, as well as a model disclosure. Employers and service providers using the model disclosure and following the prescribed assumptions and Department of Labor rules would be insulated from liability.
Companion legislation was introduced in the U.S. House of Representatives today by U.S. Reps. Luke Messer, R-Ind.-06, and Mark Pocan, D-Wis.-02.
Several industry groups are urging support for the Lifetime Income Disclosure Act, including American Council of Life Insurers (ACLI), TIAA Financial Services, the Insured Retirement Institute (IRI) and the Women’s Institute for a Secure Retirement (WISER).
Murphy and Isakson previously introduced the legislation in the 114th Congress. The Lifetime Income Disclosure Act was included in the Retirement Enhancement and Savings Act of 2016, which previously passed the Senate Finance Committee by a unanimous vote of 26-0 on Sept. 21, 2016.
Full text of the legislation is available here.