[Congressional Record Volume 155, Number 178 (Thursday, December 3, 2009)]
[Senate]
[Pages S12327-S12328]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Mr. Isakson, and Mr. Kohl):
  S. 2832. A bill to amend the Employee Retirement Income Security Act 
of 1974 to require a lifetime income disclosure; to the Committee on 
Health, Education, Labor, and Pensions.
  Mr. BINGAMAN. Mr. President, I rise today to introduce the Lifetime 
Income Disclosure Act, to help Americans ensure they do not outlive 
their retirement savings. I am pleased to be joined by my colleague on 
the Health, Education, Labor and Pensions Committee, Senator Isakson, 
and the Chairman of the Aging Committee, Senator Kohl, in introducing 
the Act. In sum, the Act would require private defined contribution 
retirement plans annually to show plan participants how their account 
balances translate into monthly income equivalents, based on age at 
retirement and other factors. The act is structured so as not to impose 
a material burden on employers.
  As life expectancies rise, individuals have an increasing need for 
protection against the risk that they will outlive their savings. In 
fact, Boston College's National Retirement Risk Index recently found 
that half of American households are ``at risk'' of being unable to 
maintain their pre-retirement standard of living in retirement.
  But trends in retirement plan coverage are only increasing this risk. 
Defined benefit pension plans--to which employers make regular fixed 
contributions--are becoming rare. Individuals who receive any form of 
workplace retirement account are increasingly offered the opportunity 
to contribute to defined contribution plans, like 401(k)s, to which the 
employer may or may not provide a matching contribution. At present, 
401(k) plan statements typically provide a total account balance, but 
not a monthly income equivalent. Consequently, employees are not well-
prepared to evaluate whether they are saving adequately to maintain 
cost of their current standard of living in retirement.
  To address this challenge, the act would require that defined 
contribution plans subject to ERISA, such as 401(k) plans, include 
``annuity equivalents'' on benefit statements provided to employees. An 
annuity equivalent is the monthly annuity payment that would be made if 
the employee's total account balance were used to buy a life annuity 
that commenced payments at the plan's normal retirement age, generally 
65. The act requires the statement to show the monthly annuity payments 
under both a single life annuity and a qualified joint and survivor 
annuity--that is, an annuity with survivor benefits payable for life to 
the employee's spouse. The annuity equivalents would only be required 
to be provided once a year, even where quarterly statements are 
otherwise required.
  In this regard, 401(k) benefit statements would become better 
coordinated with Social Security benefit statements, which only express 
benefits in the form of a life annuity. Knowing the amount of monthly 
income they can expect from Social Security and their define 
contribution plan will help employees determine whether they are on the 
path to a secure retirement. Additionally, including annuity 
equivalents on benefit statements will make employees more aware of the 
possibility upon retirement of receiving at least a portion of their 
benefit in the form of an annuity that protects them against outliving 
their savings.
  As I have already discussed, this proposal addresses a critical 
public policy issue. But it is equally important that the proposal be 
structured not to impose any material burden or potential liability on 
employers that voluntarily maintain a plan. Thus, the act directs the 
Department of Labor to issue, within a year, assumptions that employers 
may use in converting a lump sum amount into an annuity equivalent. 
Accordingly, employers will be able to base their annuity equivalents 
entirely on clear mechanical assumptions prescribed by the DOL. Of 
course, to the extent that a participant's benefit is or may be 
invested in an annuity contract that guarantees a specified annuity 
benefit, the DOL shall, to the extent appropriate, permit such 
specified benefit to be treated as an annuity equivalent.
  The DOL would further be directed to issue, within a year, a model 
disclosure that explains the assumptions used to determine the annuity 
equivalents and the fact that the annuity equivalents provided are only 
estimates. This model disclosure would include a clear explanation that 
actual annuity benefits may be materially different from such 
estimates.
  The act also provides employers with a clear path to avoid liability: 
under the act, employers and service providers using the model 
disclosure and following the prescribed assumptions and DOL rules would 
not have any liability with regard to the provision of annuity 
equivalents. This exemption from liability would apply to any 
disclosure of an annuity equivalent that incorporates the explanation 
from the model disclosure and that is prepared in accordance with the 
prescribed assumptions and DOL rules. For example, subject to such 
conditions, the exemption would apply to annuity equivalents available 
on a Web site or provided quarterly.
  Finally, the act would not go into effect until a year after the DOL 
has issued the guidance needed by employers to implement the new rules.
  Our proposal is a small step, but one that can make a significant 
difference in beginning to tackle a key policy challenge. I am pleased 
that the act enjoys the support of many advocates for retirement 
security, including AARP, the Women's Institute for a Secure 
Retirement, and the Council of Independent 401(k) Recordkeepers. I look 
forward to working with Senators Isakson and Kohl to see these 
provisions enacted into law.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2832

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Lifetime Income Disclosure 
     Act''.

     SEC. 2. DISCLOSURE REGARDING LIFETIME INCOME.

       (a) In General.--Subparagraph (B) of section 105(a)(2) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1025(a)(2)) is amended--
       (1) in clause (i), by striking ``and'' at the end;
       (2) in clause (ii), by striking ``diversification.'' and 
     inserting ``diversification, and''; and

[[Page S12328]]

       (3) by inserting at the end the following:
       ``(iii) the lifetime income disclosure described in 
     subparagraph (D)(i).
     In the case of pension benefit statements described in clause 
     (i) of paragraph (1)(A), a lifetime income disclosure under 
     clause (iii) of this subparagraph shall only be required to 
     be included in one pension benefit statement in each calendar 
     year.''.
       (b) Lifetime Income.--Paragraph (2) of section 105(a) of 
     such Act (29 U.S.C. 1025(a)) is amended by adding at the end 
     the following new subparagraph:
       ``(D) Lifetime income disclosure.--
       ``(i) In general.--

       ``(I) Disclosure.--A lifetime income disclosure shall set 
     forth the annuity equivalent of the total benefits accrued 
     with respect to the participant or beneficiary.
       ``(II) Annuity equivalent of the total benefits accrued.--
     For purposes of this subparagraph, the `annuity equivalent of 
     the total benefits accrued' means the amount of monthly 
     payments the participant or beneficiary would receive at the 
     plan's normal retirement age if the total accrued benefits of 
     such participant or beneficiary were used on the date of the 
     lifetime income disclosure to purchase the life annuities 
     described in subclause (III), with payments under such 
     annuities commencing at the plan's normal retirement age.
       ``(III) Life annuities.--The life annuities described in 
     this subclause are a qualified joint and survivor annuity (as 
     defined in section 205(d)), based on assumptions specified in 
     rules prescribed by the Secretary, including the assumption 
     that the participant or beneficiary has a spouse of equal 
     age, and a single life annuity. Such annuities may have a 
     term certain or other features to the extent permitted under 
     rules prescribed by the Secretary.

       ``(ii) Model disclosure.--Not later than 1 year after the 
     date of the enactment of the Lifetime Income Disclosure Act, 
     the Secretary shall issue a model lifetime income disclosure, 
     written in a manner so as to be understood by the average 
     plan participant, that--

       ``(I) explains that the annuity equivalent is only provided 
     as an illustration;
       ``(II) explains that the actual annuity payments that may 
     be purchased with the total benefits accrued will depend on 
     numerous factors and may vary substantially from the annuity 
     equivalent in the disclosures;
       ``(III) explains the assumptions upon which the annuity 
     equivalent was determined; and
       ``(IV) provides such other similar explanations as the 
     Secretary considers appropriate.

       ``(iii) Assumptions and rules.--Not later than 1 year after 
     the date of the enactment of the Lifetime Income Disclosure 
     Act, the Secretary shall--

       ``(I) prescribe assumptions that administrators of 
     individual account plans may use in converting total accrued 
     benefits into annuity equivalents for purposes of this 
     subparagraph; and
       ``(II) issue interim final rules under clause (i).

     In prescribing assumptions under subclause (I), the Secretary 
     may prescribe a single set of specific assumptions (in which 
     case the Secretary may issue tables or factors that 
     facilitate such conversions), or ranges of permissible 
     assumptions. To the extent that an accrued benefit is or may 
     be invested in an annuity contract, the assumptions 
     prescribed under subclause (I) shall, to the extent 
     appropriate, permit administrators of individual account 
     plans to use the amounts payable under such contract as an 
     annuity equivalent.
       ``(iv) Limitation on liability.--No plan fiduciary, plan 
     sponsor, or other person shall have any liability under this 
     title solely by reason of the provision of annuity 
     equivalents which are derived in accordance with the 
     assumptions and rules described in clause (iii) and which 
     include the explanations contained in the model lifetime 
     income disclosure described in clause (ii). This clause shall 
     apply without regard to whether the provision of such annuity 
     equivalent is required by subparagraph (B)(iii).
       ``(v) Effective date.--The requirement in subparagraph 
     (B)(iii) shall apply to pension benefit statements furnished 
     more than 12 months after the latest of the issuance by the 
     Secretary of--

       ``(I) interim final rules under clause (i);
       ``(II) the model disclosure under clause (ii); or
       ``(III) the assumptions under clause (iii).''.

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