Retirement Pros Optimistic on Lifetime Income Disclosure Deal

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By Warren Rojas

Linking a retiree’s future income to specific insurance products isn’t the image retirement advocates necessarily want to plant in everyone’s mind.

But if doing so will propel a bipartisan package of pro-savings provisions across the legislative goal line this year, even opponents of a divisive plan to require lifetime income disclosures say the broader win will be worth it.

The major stumbling blocks to the disclosure provisions now before Congress come from the investment world objecting to perceived bias toward insurance companies, as well as wariness about exposing individual employers to unrealistic expectations from retirees.

For about a decade, Congress has heard pitches to amend the federal Employee Retirement Income Security Act to require employers to use graphics showing retirement account holders how much they could collect each month from a hypothetical lifetime annuity. One such plan, the Lifetime Income Disclosure Act, is included in the Retirement Enhancement and Savings Act of 2018 the Senate Finance Committee (S. 2526; H.R. 5282) unanimously approved earlier this year.

House Republican tax writers didn’t include LIDA in the Family Savings Act (H.R. 6757), which is bundled in the Tax Reform 2.0 package. The House Ways and Means Committee approved H.R. 6757 by a party-line vote on Sept. 13.

Supporters in both parties note that the illustrative tool is automatically shared with participants in the Thrift Savings Plan, the defined contribution program offered to government employees. A House aide told Bloomberg Law that the projections feature estimated monthly payment options that are “intentionally conservative,” with calculations based on purchasing a lifetime annuity from an insurance company.

“It’s meant to be a guidepost” rather than investment advice, said the House aide.

Ironing Out Differences

Trade groups such as the American Council of Life Insurers and AARP support lifetime income disclosure requirements. The ERISA Industry Committee laid out its problems with RESA in a letter this spring, urging Senate lawmakers to avoid any confusion by replacing projected income figures with additional information about the importance of saving more for retirement and outsourcing any lifetime income stream calculators to the Department of Labor rather than making individual employers develop their own models.

Some members of the U.S. Chamber of Commerce would prefer to see additional distribution options in the advisory mix—the long-standing 4 percent draw-down rule, for instance. But legislative staffers said LIDA or other unresolved issues would be reviewed in a bicameral conference.

Mutual funds have complained that LIDA unfairly favors annuities. A Senate aide said some employers also are “nervous” about being on the hook for projected earnings that never materialize.

“We think we’ve provided fiduciary relief to providers that they’re not going to be liable,” the Senate aide said.

Ironing out differences seems very doable, legislative aides told Bloomberg Law. None of the congressional staffers who spoke with Bloomberg Law expected to see a finished retirement package reach President Donald Trump ’s desk ahead of the politically charged November midterm elections.

Even if one chamber or the other were to change hands this November, the LIDA provision could still prevail.

“I don’t think this dies at the end of the year just because we can’t get it across the finish line,” the House aide told Bloomberg Law. The staffer predicted that Ways and Means ranking member Richard Neal (D-Mass.), author of two other retirement savings bills (H.R. 4523; H.R. 4524), will make pensions a top priority if his party returns to power this fall. RESA co-author Sen. Ron Wyden (D-Ore.) has included the LIDA language in the last two iterations of the bill.

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