Bipartisan legislation has been introduced in both the House of Representatives and the Senate that would require annual estimates of how participants' savings would translate into monthly income in retirement.
In the House, Reps. Luke Messer, R-Indiana, Dave Reichert, R-Washington, Mark Pocan, D-Wisconsin, and Ron Kind, D-Wisconsin introduced the Lifetime Income Disclosure Act.
Sens. Chris Murphy, D-Connecticut, and Sen. Jonny Isakson, R-Georgia introduced companion legislation in the Senate.
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Annual estimates would be based on the total savings accrued in a participant's workplace savings account. Estimations of the monthly income the savings would generate would be based on an annuitized value of the accounts.
The legislation gives the Department of Labor authority to establish a single set of specific income assumptions, or a range of "permissible" assumptions, according to language in law.
Lifetime income stream equivalents would be provided only as an "illustration," and disclosures to participants would explain that income generated from actual of annuities purchases could be "substantially" different from estimates.
To address potential discrepancies in the estimates, the legislation limits plan sponsor liability.
"No plan fiduciary, plan sponsor, or other person shall have any liability under this title" for providing the estimates, so long as they're provided within the guidelines the law gives the DOL authority to set, according to language in the bill.
Predictably, representatives of the insurance industry strongly support the measure.
The income stream estimates "would provide workers with key information they need to make wise decisions about retirement and retirement savings," said Dirk Kempthorne, president and CEO of the American Council of Life Insurers.
"Our research shows that nine in 10 workers want this information on their benefit statements. More than 75 percent of plan participants in our study said they would increase their plan contributions by 4 percent or more after seeing lifetime income estimates," said Cathy Weatherford, president and CEO of the Insured Retirement Institute.
A previous attempt to require lifetime income disclosures stalled in the House in 2013.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
