Experts in the annuity industry have been pushing the government to make changes to regulations that would allow for more use of annuities in 401k plans. The Retirement Enhancement and Savings Act of 2016 does just that. It was recently passed by the Senate Finance Committee with an overwhelming 26 to 0 vote. This information comes from the 401k Specialist article “Beltway Bill To Help Annuities In 401(k)s Gets Boost,” by John Sullivan. Committee Chairman Senator Orrin Hatch said that the changes made by these regulations have been sought after by committee members on behalf of their constituents. The changes to the overall retirement system will make it easier for employers and 401k sponsors to offer annuity products to their plan participants. This is important because annuities allow employees to create a lifetime stream of guaranteed income from their defined contribution plans rather than retire with a lump sum of money they could spend down too easily.
Senator Hatch said that having an employer sponsored retirement plan to participate in can be the deciding factor to whether or not people save adequately for their retirement. The Retirement Enhancement and Savings Act of 2016 gives many different options to companies to help them offer their workers employer sponsored retirement plans. There are choices for all different sizes of companies as well. Small businesses will get tax credits for offering auto-enrollment and for the startup costs of their 401k retirement plans. There will be important changes to IRAs as well. The overall goal is to make 401k annuities more accessible to employees. Another way the bill plans to meet this goal is to make it easier to take your 401k with you when you change jobs. They are also offering some legal protection for 401k plan sponsors who are trying to help their employees guarantee lifetime income with annuities. If 401k plan sponsors offer annuity products from insurance companies that are supervised by the state, they can get some legal protection against lawsuits.
It’s important for the retirement success of Americans to have employer sponsored 401k options, especially those who offer annuity products to create lifetime income from their retirement savings. The Retirement Enhancement and Savings Act of 2016 acknowledges the importance of having a 401k annuity option to increase your financial security in retirement.
Written by Rachel Summit