U.S. Senator Johnny Isakson (R-GA) joined Democrat Chris Murphy of Connecticut Tuesday and re-introduced bipartisan legislation that he says will help Americans ensure they do not outlive their retirement savings.
The Lifetime Income Disclosure Act, would require 401(k) plan sponsors to inform participating workers of the projected monthly income they could expect at retirement based on their current account balance.
Isakson believes that with the shift to 401(k) plans, American workers have become increasingly responsible for putting savings into and managing their retirement investments. However, he points out that studies have found that many Americans are not saving enough, and they are unsure how quickly or slowly to draw down their savings in their retirement years.
“We’re working to ensure Americans have all the information they need to make informed decisions about their retirement investments early on, because the last thing they should have to worry about is running out of savings during their retirement years,” said Isakson. “This information not only helps today’s workers to plan ahead, but promotes increased savings while they are still in the work force.”
Under Isakson’s plan, statements would be mailed out each year and include estimated monthly benefits based on current earnings — much like the Social Security Administration’s annual statements. According to Isakson, Congress mandated annual Social Security statements in 1989.
Isakson believes that by providing similar information for 401(k) plans, the Lifetime Income Disclosure Act would give American workers a more complete snapshot of their projected income in retirement.
To ensure there is no material burden or potential liability on employers who voluntarily sponsor 401(k) plans, the legislation directs the Department of Labor to issue tables that employers may use in calculating an annuity equivalent, as well as a model disclosure. Employers and service providers using the model disclosure and following the prescribed assumptions and Department of Labor rules would be insulated from liability, under the proposed legislation.
Companion legislation, H.R. 2367, was introduced in the U.S. House of Representatives on April 25 by U.S. Reps. Mark Pocan, D-Wis.-02, and Ted Budd, R-N.C.-13. Isakson and Murphy previously introduced the legislation in 2015 and 2017.