The SECURE Act is a huge win for millions of retirement savers.
Signed into law by President Trump in December, the SECURE Act removed an obstacle that many employers said discouraged them from offering annuity options to their retirement plan participants.
Offered by life insurers, annuities are the only financial product that delivers guaranteed income for life. With fewer employers offering traditional pension benefits, retirees are increasingly responsible for actively managing their savings to provide income throughout their retirements. That is one reason why studies show that consumers are very receptive to the monthly lifetime income annuities provide.
But before the SECURE Act, annuities were rarely included in retirement savings plans. Regulations required employers to first evaluate a life insurer’s financial strength. With no reasonable way to accomplish this, most employers took a pass and kept annuities out of their plans.
Now businesses are able to rely on the work of the insurance experts—state insurance regulators – who enforce rules to ensure each and every annuity payment gets made. No other entity has more information about a life insurers’ financial strength than state insurance regulators.
The best, most recent example of the strength of the state regulatory system occurred during the financial crisis that began in 2008. Even with all of the turmoil in the markets, no active annuity insurer was liquidated during the crisis thanks to effective oversight by state insurance regulators.
While the SECURE Act makes it easier to select a life insurer, employers still have a fiduciary responsibility to decide whether to include an annuity option in their plan and to pick annuities that offer income guarantees at a fair price. And employers must provide participants with information regarding benefits and costs.
Annuity income guarantees provide peace of mind like no other product can. Thanks to the SECURE Act, employers may now focus on enhancing their 401(k) plans, providing plan participants with the option to elect the retirement income protections offered by annuities.
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.
