Representatives Donald Norcross, D-New Jersey, and Tim Walberg, R-Michigan, re-introduced the Lifetime Income for Employees Act, a bill which would make it easier for annuities to be used as the default investment in 401(k) plans, on Friday.
In order to use an annuity as a default investment option, a plan sponsor must provide to participants notices regarding the nature of the annuity and give them 180 days to divest from the annuity without penalty, according to the bill re-introduced in the House on Friday.
Further, if a participant is defaulted into the annuity, no more than 50% of their contributions can be put into it. This is to ensure participants’ savings are invested in a diversified portfolio, including other funds that will tend to be more liquid.
Norcross and Walberg proposed a similar bill in 2020 and reintroduced it again in 2022 to widespread industry support, but the legislation did not make it out of committee.
Norcross’ office provided an emailed statement: “To ensure that QDIAs continue to contain a mix of asset classes, which Congress required in 2006, the bill would provide that no more than 50 percent of the investment could be allocated to the annuity fixed income component. For younger employees the annuity would likely be much less than 50 percent. The remaining mix of assets would continue to consist of mutual funds, collective trusts, or other securities or pooled funds. Ultimately, the law would rely upon the fiduciary obligation of the plan...
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