ACLI Panel Predicts A SECURE Future For Annuities

After a successful 12 months lobbying Congress on retirement security issues, the American Council of Life Insurers is looking for "SECURE Act 2.0" in 2021.

And the potential impact is much higher, added Kathleen Coulombe, vice president for retirement security and principal deputy of federal relations for ACLI. She was part of an all-ACLI panel Tuesday that discussed the legislative and regulatory landscape.

Signed into law by President Donald Trump in December 2019, the SECURE Act includes a host of retirement security measures -- in particular allowing small employers to band together to offer 401(k) plans. That measure is expected to create 700,000 new retirement accounts, bill supporters said.

In the next round of legislative action, groups such as ACLI want to see a bill requiring employers to offer 401(k) reitrement accounts.

"The automatic retirement plan proposal would create 22 million [new retirement accounts]," Coulombe said. "So talk about moving the needle, it really could have a big impact on savings."

Rep. Richard Neal, D-Mass., first introduced the Automatic Retirement Plan Act in 2017. It would require many employers to offer a 401(k) or 403(b) plan. He also rolled out the Retirement Plan Simplification and Enhancement Act, which would modify the current automatic enrollment safe harbor cap of 10% of pay, and establish a new safe harbor to get employers to defer more than the automatic deferral floor of 3% of salary in the first year.

The latter bill would exempt retirement savings below $250,000 from complicated required minimum distribution rules and make it easier to take advantage of the saver's credit.

Good For Annuities

Passed after a long lobbying effort, a big component of the SECURE Act -- which stands for Setting Every Community Up for Retirement Enhancement -- is loosening the rules governing annuities inside retirement plans.

While companies already can offer annuities in their 401(k) lineups, just 9% do, according to the Plan Sponsor Council of America. The SECURE Act aims to boost that figure, and improve retirement readiness, by eliminating companies’ fear of legal liability if the annuity provider fails or otherwise fails to deliver.

The act creates a safe harbor that employers can use when choosing a group annuity to include as an investment within a defined-contribution plan.

"Employers received regulatory clarity so that they can feel more comfortable providing an annuity investment option," Coulombe said. "Providing workers with the ability to choose an investment option that provides income for life really is key when you're trying to ensure that you don't outlive your savings."

Another big piece of the SECURE Act is a requirement that plan sponsors provide a statement, at least once during a twelve-month period, that sets forth the “lifetime income stream equivalent” of the participant’s account balance.

"You'll see an illustration of what your balance will translate to during retirement," Coulombe said. "Seeing this respectable balance in your account can make it seem like you're all set for retirement. But when you see what that breaks down to monthly, that might help you make better decisions whether you need to save more, because as we all know your retirement could last 20 to 30 years."

But it is the multiple-employer plan idea that headlines the SECURE Act. The Department of Labor has a proposal out for comment on registration regulations for MEPs, said Jim Szostek, vice president and deputy of taxes and retirement security for ACLI.

The DOL is also working on the regulations for the annual account statement as well, he added.

"For us [in 2021], getting the DOL to finish up its regulatory work on the SECURE Act, it would be key, and I think it's achievable," Szostek said. "So we're looking forward to seeing that get done."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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