Senators Introduce Lifetime Income Disclosure Bill
On February 2, Senators Jeff Bingaman (D-NM) and Johnny Isakson (R-GA), members of the Senate Health, Education, Labor and Pensions (HELP) Committee, along with Senate Special Aging Committee Chairman Herbert Kohl (D-WI), introduced the Lifetime Income Disclosure Act, legislation that would require 401(k) plan sponsors to inform participating workers of the projected monthly income they could expect at retirement based on their current account balance.
Defined contribution plans subject to ERISA – including 401(k) plans – would be required annually to inform participants of how the account balance would translate into guaranteed monthly payments based on age at retirement and other factors.
An official summary of the measure is also available from The American Benefits Council. Rather than set up another bureaucratic mess with its additional costs and administrative burden, employers could direct employees to a site like Immediate Annuities where real life quotes are available and the individual can customize their preferences in a variety of scenarios…free!
Dont get me wrong, the annuity information is very important, but exercising a modest amount of common sense and initiative along with some appropriate communications from the plan sponsor is all that is needed. Com’on, another federal law to tell people about an annuity. That may have been necessary in 1950, but in the 21st century?
Employers providing 401(k) plans and especially those that have replaced a defined benefit plan with a defined contribution plan have an obligation to provide this kind of information and to educate their workers. All that can be done with simple, repetitive and inexpensive communications.