The law also requires plan participants to receive an illustration of how much monthly income their retirement savings will provide, which is likely to be an automatic boon for lifetime income annuities.

Small business owners who up until now have vetoed creating a 401(k) plan may also need their advisor thanks to new choices and tax perks. The legislation significantly increases the tax credit for new plans from the current cap of $500 to a more realistic $5,000. Small employers that implement an automatic enrollment feature in their retirement plan design would also be eligible for an additional $500 credit.  

Also noteworthy, the SECURE Act would ease the existing rules restricting multiple employer plans (MEPs) and allow two or more unrelated employers to join a pooled employer plan, producing economies of scale that can expand access to plans and lower both employer and plan participant costs.

Victory Lap

Insurance industry trade groups are, not surprisingly, taking a victory lap for what can only be termed a very long, creative and successful lobbying campaign to get the SECURE Act across the finish line.

“We’re pretty proud of the work we’ve done and looking forward to seeing it through to the president signing it,” said Paul Richman, chief government and political affairs officer of the Insured Retirement Institute.

“We think it will create more opportunities and demand for financial advice and offer far more employees the opportunity to save, even longtime, part-time employees. The creation of more open MEPs plans is estimated to create 700,000 new retirement accounts,” he said. “Giving employees more retirement options, including a lifetime income option, means they will need and appreciate advice much earlier,” Richman said.

Judi Carsrud, assistant vice president of government relations at the National Association of Insurance and Financial Advisors, said the annuities provisions in the bill are a “wonderful change that are critical to those who need guaranteed income. This makes it easier for them to fund that during employment.

“It will be interesting to see how the marketplace responds,” added Carsrud. “I personally think that advisors work in their investors’ best interest and they won’t double up on fees for rollovers in kind. The marketplace will adjust.”

In fact, Carsrud said, she personally believes the likelihood of a higher volume of pretax dollars flowing into annuities contracts will lead to lower annuity prices overall.

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