It’s a swing and a miss from some big sluggers in the retirement arena. They tried to smack a key feature of the House-passed retirement bill, the SECURE Act, in a new report.
They complained employers have little responsibility under SECURE to vet the finances of a life insurance company offering an annuity for a 401(k) plan.
In fact, employers still will have to weigh the overall benefits and costs associated with their selection of any annuities they offer under their plans. Annuities can guarantee lifetime income like an old-fashioned pension.
What is new in SECURE is that employers would be able to rely on THE EXPERTS, state insurance departments, to ensure that life insurers will be there now and in the future to make every annuity payment. The states are doing that now, actively supervising and enforcing robust solvency rules on life insurers.
Presently, employers must either hire a costly financial expert to audit an annuity provider’s books or figure out for themselves whether an insurer can deliver on its promises. It’s a big task – so big that it has discouraged most employers from offering annuities, which studies show retirement savers want.
The fact is, life insurers, who alone offer annuities, are up to the task.
They’re financially strong. And they withstood the greatest recent test of financial strength, the 2008 financial crisis. In 2011, then-U.S. Treasury Secretary Timothy Geithner said the insurance industry fared “quite well” through the crisis.
To be sure, not all companies are equally strong. But companies that are incapable of meeting payment obligations couldn’t even be considered. SECURE only aims to encourage greater annuity usage. It’s only logical that an employer motivated by the bill would consider annuities that meet the long-term needs of their workforce.
When passed, SECURE will help people who want to turn a portion or all of their 401(k) savings into a lifetime income. The hot wind from the big sluggers’ swing is a strike out.
Jack Dolan is Vice President, Public Affairs at the American Council of Life Insurers (ACLI). A former journalist and Capitol Hill aide, he joined ACLI in 1991. He has represented ACLI in print, broadcast and online news outlets on a wide range of financial and retirement security issues facing American families.
