Annuities inside 401(k) retirement plans could get a big boost if Congress is able to reach agreement on legislation this year.
The annuity proposal is just one idea lawmakers are considering to pump up retirement savings in what could become the biggest changes to retirement plan administration in more than a decade.
Retirement and savings incentives will make up one of three bills in the “Tax Reform 2.0” package House Republicans are assembling, The Wall Street Journal reported this week, citing Rep. Kevin Brady (R-Texas), chairman of the Ways and Means Committee.
Ideas are expected to originate with the Retirement Enhancement Savings Act of 2018, a Senate bill introduced by Senate Finance Committee Chairman Orrin Hatch, R-Utah, with ranking member Sen. Ron Wyden, R-Ore.
While the bill contains several components, an important one would allow employees to invest their employer-sponsored plan assets in a portable annuity. Employees could take the annuity with them if their employer switches to a new plan provider or the employee changes jobs.
A similar bill was introduced in the House and enjoys bipartisan support.
“Working Americans are struggling to set money aside for retirement,” Wyden said in a news release. “This bipartisan bill gives employers incentives to make it easier for their employees to save. It also allows seniors over 70 to make tax-free contributions to their IRA. These types of provisions are key to addressing our country’s savings crisis.”
'Economies Of Scale'
The legislation would also permit small businesses to band together to offer "multiple employer plans" (MEPs). Supporters include both consumer and financial services groups.
MEPs will help small companies "achieve economies of scale and avoid the administrative burden and liability in running the plan by turning over administration of the plan to a named plan fiduciary, recordkeeper, and plan administrator, making the plan both more affordable and effectively managed," said James Kais, senior vice president for Transamerica, during congressional testimony last year.
Under current law, small businesses can only join together through MEPs if they're in the same industry. There is growing bipartisan support for eliminating this unnecessary requirement.
Other ideas floating around the Beltway:
Auto-enrollment of employees in 401(k) accounts
Repeal of a provision preventing people older than 70 and a half from contributing to individual retirement accounts (IRAs).
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].