[Congressional Record (Bound Edition), Volume 149 (2003), Part 11]
[Extensions of Remarks]
[Page 14859]
[From the U.S. Government Publishing Office, www.gpo.gov]




     INTRODUCTION OF THE SECURE ANNUITY INCOME FOR LIFE ACT OF 2003

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                           HON. EARL POMEROY

                            of north dakota

                    in the house of representatives

                        Thursday, June 12, 2003

  Mr. POMEROY. Mr. Speaker, I rise today to introduce the bi-partisan 
Secure Annuity Income for Life Act (S.A.I.L.), legislation co-sponsored 
with Rep. Johnny Isakson (R-GA). This legislation will encourage 
workers to annuitize their savings to provide them with retirement 
income for life.
  Traditionally, guaranteed monthly income sources have provided the 
best means of retirement income security. However, these sources are 
playing an ever smaller role in ensuring retirement income stability. 
Social Security is facing a funding challenge. The personal savings 
rate is at an all-time low while consumer debt is at an all-time high. 
The number of defined benefit plans, or pensions, has decreased by half 
since 1977--putting pressure on defined contribution plans, like the 
401(k), to be the primary retirement plan.
  As a result of the growth in 401(k) plans, greater amounts of 
retirement savings will not be annuitized. According to the Department 
of Labor, only 38 percent of workers in a 401(k) plan have an annuity 
option available to them. However, about $2.5 trillion in retirement 
assets are invested in individual retirement accounts (IRAs), mostly as 
a result of rollovers from defined contribution plans. That compares 
with $1.8 trillion in defined benefit plans and $2.4 trillion in 
defined contribution plans. The amount of IRA rollovers is expected to 
increase by 50% in the next ten years, mostly as a result of 
retirements. Workers will face a number of risks when managing these 
savings in retirement.
  When workers take a lump-sum distribution, or rolls his 401(k) 
savings into an IRA, they face a number of risks when managing these 
savings in retirement:
  Unpredictable Time Horizon--Life expectancy at 65 is at least 18 
years--but that is only an average and not very useful in planning. In 
fact, 28 percent of females that are 65 years old will live to age 90 
and 17 percent of males that are 65 will live to age 90. The 
probability that at least one person from a married couple that is 65 
years old will live to age 90 is 40 percent.
  Market Risk--Retirees have a shorter time horizon in which to recover 
from market downturns. Market downturns at the beginning of retirement 
can significantly reduce how long a retiree's nest egg will last.
  Inflation--Income must double over a twenty-year period just to stay 
even with average rates of inflation. Since most pension plans do not 
have cost of living income adjustments each year (unlike Social 
Security), personal savings experience even greater strain.
  By annuitizing retirement assets--either through an employer or 
private commercial entity--retirees reduce the risk of retirement 
income instability. Public policy should encourage individuals to 
manage their savings during retirement in a manner that accommodates 
their daily needs but also ensures that their savings will not be 
exhausted prematurely. Only annuities can make this guarantee. 
Annuities transfer the risk of outliving assets from the individual to 
an insurance company -just as individuals transfer risks to insurance 
companies for their properties, accidents, and health costs.
  The S.A.I.L. Act is designed to encourage individuals to annuitize 
their retirement savings as an efficient solution to what otherwise 
could be an overwhelming asset management task. Specifically, it would 
allow workers who participate in employer sponsored retirement savings 
plans, and who save through IRAs, to receive $3,000 of annual taxfree 
income from annuities. Some may consider this a small incentive, but it 
is a progressive way to entice low to moderate income individuals to 
annuitize some of their retirement savings.
  I look forward to working with my colleagues to ensure that 
retirement income security encourages workers' to annuitize their 
savings so that they will receive guaranteed monthly income for life. I 
believe this is an important policy objective and encourage my 
colleagues to co-sponsor the bill.

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