New York Estate Planning & Elder Law Blog
A pair of proposed bills are working their way through the halls of Congress that could help encourage Americans to make voluntary contributions to their retirement funds, helping them live more comfortable and financially stable lives in their golden years. With looming changes to Social Security and rising healthcare costs, Americans young and old need to take heed of warnings by economists and activity plan for their retirements.
One of those bills is the Retirement Enhancement and Savings Act of 2018, jointly sponsored by Orrin Hatch (R-Utah) and Ron Wyden (D-Oregon), which is a collection of smaller bills that combined call help ordinary people make larger contributions to their retirement accounts. This legislation mirrors a similar proposal approved by the Finance Committee in 2016 but floundered when Congress adjourned before taking any action on the bill.The bill would help participants in retirement savings programs think in terms of lifetime income instead of accumulated balances.
The Retirement Enhancement and Savings Act of 2018 would require benefit statements include estimates of lifetime income at least once a year and would direct the Department of Labor to develop a model for constructing income estimates. The Act would also provide fiduciaries a safer place for selecting a lifetime income provider thus eliminating uncertainty concerning applicable fiduciary standards for offering lifetime income benefits under a defined-contribution plan.
The second bill, known as Lifetime Income Disclosure Act (H. R. 2055), would amend the Employee Retirement Income Security Act of 1974 (ERISA) to require pension benefit statements to include a lifetime income disclosure at least once a year. By shifting the from stocks (401(k) balances) to flows (monthly income), participants would be given a much better grasp of the total amount of their expenses their 401(k) accounts would be able to pay for in retirement.
The Department of Labor has understood the power such information could give workers to help save for retirements and in 2013 the Department issued for comment an advance notice of proposed rulemaking to help 401(k) programs show participants how far these accounts could go to fulfill retirement expenses. While that effort by the Labor Department never really materialized into meaningful action, members of Congress have since carried the effort to help empower workers. One of the man obstacles is giving consumers realistic calculations based on projected inflation to give them a realistic idea of what their retirement accounts will cover and how much to save.