Requiring annuities or other fixed-income products be included as an option in 401(k) plans is being considered by the House Education and Labor Committee, said Rep. Robert Andrews, D-N.J., chairman of the committees Health, Employment, Labor and Pensions Subcommittee.
In the midst of the market meltdown, a lot of the wealthy have moved from equity markets to Treasury bills, Mr. Andrews said in an interview. A lot of other people dont have that option in their retirement savings.
I see this as a way that every defined contribution participant could, in effect, transform their account into a defined benefit type of account, Mr. Andrews said. They could opt for an annuity product that gives them a guaranteed income. Its a choice that everyone should have, Mr. Andrews added.
Only about a third of 401(k) plans have a fixed-income option, Mr. Andrews said.
That is a surprisingly small number, he said.
Last year, the Education and Labor Committee approved a bill that would require more disclosure of 401(k) fees, and the committee is currently considering similar legislation, Mr. Andrews said.
Requiring an annuity or fixed-income option was not in the bill approved last year by the committee. Its under consideration this year, he said.
Legislation aimed at improving 401(k) fee disclosure is likely to include a requirement that all 401(k) plans include at least one low-cost index-type fund, Mr. Andrews said. That provision was in last years bill.
The mutual fund industry, which manages many of the nations 401(k) plans, opposes mandating that type of requirement, said Investment Company Institute president and chief executive Paul Schott Stevens.
The design of the system, left up to employers, is sound and has worked well, he said.
About 70% of all 401(k) plans already have an equity index fund option, Mr. Stevens added.