What Is the Lifetime Income for Employees (LIFE) Act?
Representatives Donald Norcross (D-NJ) and Tim Walberg (R-MI) who are both members of the House Committee on Education and Labor, reintroduced the bipartisan Lifetime Income for Employees (LIFE) Act of 2022. This proposed legislation would allow annuities to be a default investment option in an employer-sponsored 401(k) plan.
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The LIFE Act addresses the requirements around the qualified default investment regulatory safe harbor. This builds on the SECURE Act provision that enhanced the safe harbor that plan sponsors could look to when selecting an annuity provider.
The proposed legislation would provide the following requirements for plan sponsors:
- An annuity contract cannot impose a liquidity restriction on the transfer amounts during the 180-day period beginning on the date of the initial investment in the annuity contract by the participant or beneficiary.
- The plan sponsor fiduciary ensures that each participant or beneficiary is provided not later than 30 days before the date of the imposition of a liquidity restriction written notice that includes:
- Circumstances under which assets in the account may be invested on behalf of the participant or beneficiary in the annuity contract,
- Explanation of the rights of the participant or beneficiary to direct or transfer amounts invested, or to be invested, in an annuity contract to other investment alternatives under the plan,
- General description of the annuity contract,
- Explanation of how a participant or beneficiary may obtain additional information, in writing or electronically, and
- A copy of the annuity contract.
- A fiduciary cannot allocate more than 50% of any periodic contribution or, immediately after a rebalancing of account investments, 50% of the value of the assets of the account, to the annuity contract.
Most qualified default investment alternative (QDIA) products do not address a participant’s need for guaranteed retirement income. By amending the QDIA safe harbor, the LIFE Act would allow participants, through a default offering, to adopt annuities with the hope that more individuals will be able to successfully transition from saving for retirement to receiving a guaranteed income stream in retirement.
“For too many families, the thought of having enough set aside for their retirement years remains out of reach. Encouraging and increasing access to savings options will help provide workers with greater peace of mind that their income will last throughout retirement.”– Congressman Walberg (R-MI)
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