ERISA Annuity Safe Harbor Bill Introduced in House

H.R. 1439, known as the Increasing Access to a Secure Retirement Act, would establish a stronger Employee Retirement Income Security Act (ERISA) safe harbor for defined contribution (DC) plan sponsors to offer in-plan guaranteed income products.

U.S. Representatives Lisa Blunt Rochester, D-Delaware, and Tim Walberg, R-Michigan, have introduced another piece of legislation aimed at tackling a longstanding retirement security issue faced by private-sector workers.

H.R. 1439, or the Increasing Access to a Secure Retirement Act, seeks to help more Americans retire with dignity and peace of mind, according to Blunt Rochester and Walberg. They say their bipartisan bill “clarifies and strengthens existing rules to make it easier for retirement plan sponsors to provide guaranteed lifetime income products as part of their employee benefits.”

While a variety of in-plan income options have been available for some time, in-plan guaranteed lifetime income solutions are not being used as much as they could, industry experts agree. Fewer than half of plan sponsors offer a retirement income solution as part of their defined contribution plan—typically a 401(k)—and only one-fifth of those offer a guaranteed income product, Prudential says.

While introducing the legislation, the lawmakers said benefit plan sponsors are concerned about potential fiduciary breaches when they are selecting an annuity provider. Survey data shows sponsors are concerned about the prospect of an annuity provider losing solvency in the future after participant assets have been annuitized—and that the plan sponsor could then again become liable for paying the promised benefit to participants.

Representative Blunt Rochester, citing the Federal Reserve Bank of St. Louis, suggested retirement savings are “down by 75% over the last 50 years,” and that over one-third of surveyed households do not participate in a retirement plan today.

“This is an alarming trend that we must correct because all Americans deserve a financially secure future,” she said.

In short, the Increasing Access to a Secure Retirement Act would clarify the rules surrounding annuities and strengthen safe harbor protections for plan fiduciaries under the Employee Retirement Income Security Act (ERISA).  

According to the Representatives, currently only about 10% of retirement plans in America offer a guaranteed lifetime income product—largely due to confusing and ambiguous regulations that employers must follow when selecting an insurance provider.

Full text of the bill will be available here within several days. The bill was introduced on February 28 but is still being reviewed prior to public circulation.