This month marks the 50th anniversary of the landmark retirement security legislation, the Employee Retirement Income Security Act of 1974 (ERISA).
Planning for retirement is one of the biggest challenges many individuals face. ERISA sets a national standard for retirement plans that protect individual participants and beneficiaries.
America’s life insurers have long been committed to helping Americans plan for retirement. As the way we live and work has changed over the decades, the ways life insurers help people save for retirement has kept pace.
Much has changed in the workplace and retirement landscape since 1974. Among the most dramatic shifts has been the rapid rise of defined contribution plans like 401(k) plans.
In 1974, 401(k)s didn’t exist. Some workers had a traditional defined benefit pension plan —- and many had no retirement saving plan at all. The modern 401(k) plan emerged in the late 70’s. Before long, defined contribution plans like 401(k)s became the predominant retirement savings vehicle for most Americans.
As of year-end 2023, Americans held $7.4 trillion in assets in 401(k) plans. They also held $13.5 trillion in Individual Retirement Accounts, much of it rolled over from retirement accounts with former employers.
Defined contribution plans have proven to be an excellent way to accumulate retirement funds. But unlike traditional pension plans, most DC plans don’t include an option to ensure retirees don’t outlive their savings.
There is, however, a proven solution. With an annuity, retirees can have guaranteed lifetime income just like a traditional pension plan. According to LIMRA, 52% of retirement savers said that they would consider moving some of their retirement assets into an annuity.
Unfortunately, not enough workers currently have the option to convert all or part of their savings into an annuity upon retirement. In-plan annuity options for 401(k) savers are available in only 14% of defined contribution plans, according to LIMRA. That’s why life insurers strongly supported the passage of the SECURE Act in 2019, which made it easier for defined contribution plans to offer annuity options. And we support additional measures to ensure that annuities are an option for defined contribution plan participants.
For example, defined contribution plans should be required to provide an option for 401(k) plan participants to choose an immediate single or joint & survivor annuity upon retirement. Participants 50 and older should be allowed to use in-service rollovers to purchase a deferred income annuity. The use of an in-plan annuity through default investments should be allowed, and an updated model retirement savings rollover notice should highlight the ability for individuals to purchase an annuity.
The first 50 years of ERISA have set a strong foundation for America’s savers. With more than 11,200 Americans turning 65 every day, life insurers strongly support a continued modernization of our retirement system to help more people plan and provide for a financially secure retirement.
Howard Bard is Senior Vice President and Deputy General Counsel with the American Council of Life Insurers (ACLI). Howard reports directly to the General Counsel with responsibility for supporting the legal needs of the organization. He also helps guide ACLI policy on regulation and legislation affecting the retirement security business of its members.
Kathleen Coulombe serves as the Senior Vice President, Federal Relations, for the American Council of Life Insurers (ACLI). In this capacity, she is actively involved in a multitude of public policy issues on Capitol Hill that impact the life insurance industry.
Jim Szostek is Vice President & Deputy, Retirement Security at the American Council of Life Insurers (ACLI). He helps guide ACLI policy on legislation and regulations affecting the U.S. retirement system. Prior to joining ACLI in 2008, he held positions at CIGNA and The Hartford.
