Employers would find it easier to add annuities to employer-sponsored retirement plans under a bill pending in Congress that has bipartisan support.
The annuities provision is part of the Retirement Enhancement and Savings Act of 2018, which makes several changes to retirement plan regulations. The bill’s House of Representatives version is H.R. 5282, sponsored by Rep. Mike Kelly, and the Senate version is S. 2526, sponsored by Sen. Orrin Hatch.
Currently, an employer is required to determine the financial stability of any company that offers an annuity product that the employer wants to include as an option in its retirement plan for employees. This means the smallest employer would be forced to determine the financial stability of even the largest insurance company, and every employer would have to make its own determination, said Lee Covington, senior vice president and general counsel of the Insured Retirement Institute.
The bill would remove this requirement. Insurance companies have to meet state requirements to be allowed to operate, and the employer could rely on these regulations to prove the stability of a company. The employer would still have a fiduciary duty to determine that particular annuities, if offered, were suitable for its employees.
The bill also would make the lifetime income benefits of an annuity portable, so retirement plan participants would not lose benefits if the employer made changes to the plan.
Most employers are in favor of the bill, said Covington, as are numerous organizations and associations representing consumers, including AARP, the American Retirement Association and the Insured Retirement Institute. The bill was released during an earlier session of Congress by the Senate Finance Committee by a unanimous, bipartisan vote.
“This is a commonsense reform that will break down the barrier to including annuities as one option in an employer-sponsored retirement plan,” Covington said.
Jack Dolan, vice president at the American Council of Life Insurers, added, “We are hopeful that the Retirement Enhancement and Savings Act will be considered by the 115th Congress. House Ways and Means Committee Chairman Kevin Brady has expressed an interest in moving retirement-related provisions this year, which could include this retirement bill. He is considering hearings now on retirement issues, and we are optimistic that there will be more retirement hearings in the Senate as well.”
In addition to making it easier to add annuities to plans, the bill makes numerous other changes in retirement plan regulations, such as allowing small employers to band together to offer a joint retirement plan to their employees.