New Bill Would Ease Use of Annuities as 401(k) Plan Default Options

The QDIA Liquidity Rule

A plan is supposed to make sure that a QDIA is liquid enough that a participant can move assets out of the QDIA at least once every three months, according to EBSA.

Insurers that issue annuities typically put restrictions on access to assets during the first years that an annuity contract is in place to help create the pool of assets needed to pay the annuity benefits.

In 2016, EBSA officials told TIAA in an information letter that employers should be able to use annuities as QDIAs.

In practice, the conflict between the safe harbor rules and the interpretation in the information letter has held back use of annuities as QDIAs, according to the Insured Retirement Institute, which has joined TIAA in supporting efforts to change the QDIA rules.

The Lifetime Income For Employees Act Bills

The current congress, the 118th Congress, began Jan. 3.

Norcross and Walberg first introduced the Lifetime Income For Employees Act bill, as H.R. 8990, in 2020, during the 116th Congress Congress, and then brought it back in 2022, as H.R. 6746, in the 117th Congress.

The bill looked as if it had a shot of going into the Setting Every Community Up for Retirement Enhancement (Secure) 2.0 Act, which became law in December 2022 as part of the giant Consolidated Appropriations Act, 2023 package, but negotiators left it out of the final Secure 2.0 language.

The new bill, H.R. 3942, is under the jurisdiction of the House Education and the Workforce Committee, of which Norcross and Walberg are both members.

Pictured: Rep. Donald Norcross, D-N.J. (Photo: Norcross)