Default investment in annuity contracts

(a)

In general

Section 404(c)(5) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)(5)) is amended—(1)in subparagraph (A)—(A)by inserting or subparagraph (C), as appropriate, after subparagraph (B); and(B)by inserting or in a covered annuity contract. after by the Secretary; and(2)by adding at the end the following:

(C)

Covered annuity contract

(i)

In general

For purposes of this paragraph, the term covered annuity contract means an investment in an annuity contract that meets the following requirements:(I)The annuity contract does not impose a liquidity restriction on the transfer of invested amounts during the 180-day period beginning on the date of the initial investment in such contract by the participant or beneficiary.(II)The fiduciary ensures that each participant or beneficiary is provided notice in writing in accordance with clause (ii).(III)The fiduciary allocates not more than 50 percent of any periodic contribution or, immediately after a rebalancing of account investments, 50 percent of the value of the assets of the account, to the annuity contract (or, as applicable, to the portion thereof to which a liquidity restriction applies after the 180-day period in subclause (I)).(ii)

Notice requirement

For the purposes of this subparagraph, each participant or beneficiary shall be provided notice in writing in a manner that is reasonably designed to be understood by the average plan participant, as follows:(I)Not later than 30 days in advance of the initial investment, a notice that includes—(aa)an explanation of the circumstances under which assets in the account may be invested on behalf of the participant or beneficiary in the annuity contract, including an explanation of the targeted range and maximum amount or percentage of such assets to be invested;(bb)an explanation of the rights, and any limitations or restrictions thereon, of a participant or beneficiary to direct or transfer amounts invested, or to be invested, in an annuity contract to other investment alternatives available under the plan;(cc)a general description of the annuity contract, including the duration of guaranteed payments and identification of the insurer;(dd)an explanation of how a participant or beneficiary may obtain additional information in writing about their investment alternatives; and(ee)a description of how to obtain a copy of the annuity contract.(II)Not later than 30 days before the date of the imposition of a liquidity restriction described in subclause (i)(I), that includes—(aa)a statement explaining that the participant’s or beneficiaries’ contributions will shortly become subject to liquidity restrictions;(bb)an explanation of the rights of the participant or beneficiary to direct or transfer amounts to be invested in alternatives under the plan; and(cc)an explanation of how a participant or beneficiary may obtain additional information about their investment alternatives.(iii)

Definition of annuity contract

For purposes of this subparagraph, the term annuity contract means a contract (or provision or feature thereof) that—(I)is issued by an insurer qualified to do business in a State; and(II)provides for the payment of guaranteed benefits annually (or more frequently) for a fixed term or for the remainder of the life of the participant or beneficiary or the joint lives of the participant and the participant’s designated beneficiary.

(b)

Effective date

The amendments made by subsection (a) shall apply with respect to investments made on or after the date of enactment of this Act.