New legislation being drafted by House Ways and Means Committee Chairman Richard Neal (D- MA) would require most retirement plans to make available a guaranteed lifetime income option such as an annuity for at least 50% of employees’ vested account balances, according to Former Department of Labor Assistant Secretary Preston Rutledge.
The legislation is designed to increase employees’ accumulation for retirement, the former head of the Labor Department’s Employee Benefits Security Administration (EBSA) during a Q&A at the Secure Retirement Institute’s Retirement Summit today.
While the SECURE Act made it easier for fiduciary advisors to include annuities in retirement plans for the first time, the new legislation would contain a mandate that would require that guaranteed lifetime income products such as annuities be included in most plans, Rutledge said.
“The bill we believe that Chairman Neal has been working on would require all but the smallest employers’ plans to make available a guaranteed lifetime income product on their platform for at least 50% of the vested account balance. So again, it would be mandate,” Rutledge said.
“When you put the words ‘guaranteed lifetime income’ you immediately think of annuities. There may be other ways to accomplish that,” Rutledge said.
“This is something I think we see,” the long-time Washington, DC insider said of the bill, which could pair well with the SECURE Act, which provided a safe harbor for fiduciaries who pick annuities providers and select annuities contracts for plans.
In contrast to the SECURE Act, however, under the Neal there would be an employer requirement to add annuity offerings to their retirement plans. There would be no such mandate on employees. “Employees don’t have to select and purchase an annuity,” Rutledge noted. “The idea of moving mandates onto employees is always the heaviest lift of all and we don’t’ see that.”
Chairman Neal’s spokesman did not immediately respond to a request for further information.
Even in perpetually partisan-divided Washington there has continued to be bipartisan support for retirement legislation. The House Ways and Means Committee unanimously passed SECURE 2.0 last week, which would double the small employer tax credit for starting an employee retirement plan, create automatic enrollment and escalation and increase required minimum distributions and catch-up contribution limits.
The Neal legislation might be introduced “as a bipartisan bill later in the year or they might take a run at doing it in reconciliation [which would require just 50 votes in the Senate for passage]. Again, there is no guarantee it could get through the screen of reconciliation. There are some very strict rules that the parliamentarian enforces with that.” Rutledge said.