Two bipartisan bills are making their way through the House of Representatives that would likely have a positive impact on workplace retirement plans.

H.R. 4604 would modify the Employee Retirement Income Security Act to include a safe harbor provision to cover employers who choose to add a lifetime income product to their workplace plans, and H.R. 4610 alters ERISA to allow sponsors of pension plans to send participants plan statements electronically.

H.R. 4604, sponsored by Rep. Tim Walberg, R-Mich., and Rep. Lisa Blunt Rochester, D-Delaware, states that to qualify for the safe harbor, plan fiduciaries must “engage in an objective, thorough, and analytical search for the purpose of identifying insurers from which to purchase” annuity contracts. Before selecting an insurer, they must determine if the insurers have the financial capability of fulfilling the obligations of the annuity contract and consider the cost of the contract, including fees and commissions in relation to the benefits and product features of the contract and administrative services provided under the contract.

To meet the financial capability stipulation, an insurer must prove it is licensed to offer guaranteed retirement income contracts and at the time of its selection and for each of the immediately preceding seven plan years had not had its certificate of authority from the insurance commissioner of its home state revoked or suspended. It also must show that it has filed audited financial statements in accordance with the laws of its home state and maintains reserves which satisfy the statutory requirements of all states where the insurer does business.

The insurer also must undergo a financial examination by the state insurance commissioner every five years and the insurer will notify the plan fiduciary of any change in circumstances that might impact the plan contract.

The bill also states that plan sponsors don’t have to do for the lowest cost annuity contracts. Plan fiduciaries can consider the value of a contract, including features and benefits of the contract and attributes of the insurer when deciding which insurer to select.

A plan fiduciary will not be held liable following the distribution of any benefit, or the investment by or on behalf of a participant or beneficiary pursuant to the selected guaranteed retirement income contract, for any losses that may result to the participant or beneficiary due to an insurer’s inability to satisfy its financial obligations under the terms of the contract, according to the bill.

Cathy Weatherford, president and CEO of the Insured Retirement Institute, said in a letter to the bill’s sponsors that her organization is pleased to see a bill that highlights the significant role guaranteed lifetime income can play when offered as part of a workplace retirement plan.

“As the sponsors of this legislation, you are aware the current Department of Labor rules make it very difficult and onerous for employers to satisfy their fiduciary responsibilities if they choose to offer lifetime income options such as annuities as part of their retirement plan for their workers. As a result, many employers opt to not offer lifetime income options, due in large part to the rule’s requirement that they, as the plan sponsor, must take responsibility for determining whether the annuity provider will be able to satisfy all obligations under the contract,” she said, adding that the bill “provides a workable and appropriate path for retirement plan sponsors to meet their fiduciary obligations when choosing an annuity provider.”

The Receiving Electronic Statements to Improve Retiree Earnings (RETIRE) Act, or H.R. 4610, would allow retirement plan sponsors to deliver retirement plan information to participants electronically, either through direct delivery to a participant or their beneficiary or by posting the necessary notices to a website or other Internet or electronic-based information repository that participants have access to. They also must take action to make sure the information they sent out electronically was received, especially if the content of the notice conveys the need to take action to access the posted material, according to the bill.

Plan sponsors would have to send out a paper report at least once a year and would give participants the ability to choose which form of communication they would like to receive their plan information through.

The Insured Retirement Institute sent letters to the bills’ sponsors voicing their support for both provisions.

“At a time when Americans are more responsible than ever for ensuring their own financial security in retirement, the current system of default paper delivery works against the goal of helping Americans make decisions about their retirement planning,” Weatherford wrote in a letter to bill sponsors Rep. Jared Polis, D-Colo., and Rep. Phil Roe, R-Tenn.

She added that “the density of printed disclosure documents is, for many people, intimidating, and the static nature of printed materials does not invite the kind of interactive engagement people should have to intelligently manage their retirement portfolios.”

The bill will also reduce the administrative costs of sponsoring a plan and will cut back on the plan expenses charged to plan participants, she said.

Both bills have been referred to committee.

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