IRI URGES HOUSE TO “BEEF UP” RETIREMENT SECURITY PROVISIONS IN TAX REFORM 2.0

Posted on September 11, 2018

WASHINTON, D.C. -- The Insured Retirement Institute (IRI) today said it was encouraged by retirement security provisions included in a House Republican tax reform package.

The three-bill package of tax and retirement proposals that are a follow-up to the Tax Cuts and Jobs Act enacted earlier this year is expected to be considered by the House Ways and Means Committee on Thursday.

IRI is the leading proponent of retirement security legislation and strongly supports several existing measures to improve consumers’ access to retirement plans and lifetime income products.

“We are encouraged by this effort led by House Ways and Means Committee Chairman Kevin Brady (R-Texas) to promote retirement security within a broader effort to expand upon this year’s tax reform agenda,” said Cathy Weatherford, IRI president and CEO. “We believe that the House can beef up this proposal with additional bipartisan-supported amendments that would further advance retirement security for millions of Americans.”

Like President Trump’s August 31 retirement security executive order, the House Republican proposal would remove regulatory barriers that now restrict the types of small business employers who are permitted to band together to offer a retirement plan through a Multiple Employer Plan (MEPs). The measure also would end the required minimum withdrawal of funds from 401(k) plans and other retirement saving accounts when retirees reach age 70 ½. Changing these rules would permit Americans to keep more of their money in tax-deferred retirement accounts for a longer period before requiring withdrawals.

The measure also includes provisions to ensure that employees who invest in lifetime income options through an employment-based retirement plan will not lose the guarantees associated with those investments if their employer changes recordkeepers. To avoid this result, many employers simply choose not to offer lifetime income options.

While the House bill contains several favorable provisions, IRI recommends that the House measure add several critical provisions to significantly boost retirement security that are already included in other existing bills.

“We believe it is critical that retirement security legislation must include provisions to increase access to lifetime income options in workplace retirement plans, lifetime income disclosures on benefit statements so workers can gauge what their monthly retirement income might be and, enhanced retirement plan auto-enrollment to boost employee participation,” Weatherford said.

IRI said that the House should add a provision to facilitate a saver’s ability to ensure their savings will not be outlived. It would increase access to lifetime income options by revising the annuity provider selection criteria to provide certainty for plan sponsors in the selection of lifetime income providers.

Another provision should be added to require a retirement plan participant’s benefit statements to include a lifetime income disclosure which clearly illustrates the monthly payments the participant would receive if the total account balance were used to provide lifetime income streams. IRI research found that more than 75 percent of workers said they would increase their savings level after seeing these estimates.

IRI also supports provisions to increase opportunities for workers to save by enhancing automatic enrollment and escalation features. Studies have shown that automatic enrollment is extremely successful in getting more people to save for retirement with participation rates at least 10 percentage points higher in plans with automatic enrollment.

“We appreciate that the House Republican plan acknowledges the critical need for retirement security legislation,” Weatherford said. “This is a critical time and we wish to capitalize on the momentum initiated by President Trump’s executive order and now carried forward with this proposal, to enact a strong, bipartisan retirement security measure this year.”

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Contact: Dan Zielinski