Page 18 - Investment Advisor April/May 2022

ANNUITIES UPDATE

By Melanie Waddell

Revived Bill Would Allow Annuities as

Default 401(k) Investment

The Lifetime Income for Employees Act builds on the Secure Act, which

opened the door for more annuities in retirement plans.

eps. Donald Norcross, D-N.J.,
and Tim Walberg, R-Mich.,
R reintroduced legislation in
mid-February, the Lifetime Income for
Employees (LIFE) Act of 2022, that
would allow annuities to be a default
investment option in employer-spon-
sored 401(k) plans.
The bill builds on the Setting
Every Community Up for Retirement
Enhancement (Secure) Act by allowing
retirement plan sponsors to use annui-
ties as qualified default investment
alternatives, or QDIAs, for a portion of
contributions made by participants who
have not made investment selections.
The LIFE Act addresses certain
requirements in the QDIA regulatory
safe harbor “that prevent employers
from being able to benefit from the BUILDS ON SECURE ACT income solutions like annuities — that
safe harbor if they include annuities as The LIFE Act also builds upon “the do not meet specific liquidity require-
part of their retirement plan’s default Secure Act provision that enhanced the ments,” Richman said.
investment,” said Thasunda Brown safe harbor on which plan sponsors rely The Labor Department issued an
Duckett, CEO of TIAA, in a letter to when choosing an annuity provider for information letter in 2016 that makes
the lawmakers. their retirement plan,” Duckett said. clear that an investment with an annu-
Increasingly, Duckett said, “retire- Paul Richman, chief government and ity component can be offered consis-
ment plan participants rely on their political affairs officer for the Insured tent with a plan sponsor’s fiduciary
plan’s default product as their long- Retirement Institute, added in anoth- duty, Richman continued. “However,
term investment strategy. While many er statement that under the bill, the the current QDIA safe harbor regula-
participants mistakenly believe the current QDIA safe harbor regulations tion would not allow the investment to
default option provides a guaranteed would be amended to allow, but not serve as a QDIA.”
retirement income, most QDIA prod- require, a QDIA to include a limited The bill “would simply update regu-
ucts do not.” investment — up to 50% — in a non-liq- lations to reflect innovations in retire-
By amending the QDIA safe harbor, uid annuity component, which provides ment security investment products,”
Duckett continued, “the LIFE Act will a guaranteed return on investment. Richman added. “The solution provided
encourage more employers to adopt Plan sponsors would not need to make by the Lifetime Income for Employees
annuities as part of their default offering any changes to their current QDIA. Act will significantly increase access to
so that more Americans will be able to Current Labor Department reg- and the use of protected lifetime income
transition seamlessly from saving for ulations governing QDIAs “have products to help retirement savers pro-
retirement to benefitting from a guaran- created a barrier to using certain invest- duce sustainable income during their Adobe Stock
teed income stream when they retire.” ments — including protected lifetime retirement years.”

16 INVESTMENT ADVISOR APRIL/MAY 2022 | ThinkAdvisor.com