Mr. Spence and those in the life insurance business are most excited about the bill's lifetime income-related provisions, of which there are three. The SECURE Act creates a stronger safe harbor for sponsors who choose to include a lifetime income investment option in their defined contribution plan by specifying the measures they need to take in selecting an insurer to comply with their fiduciary duties; lets participants more easily transfer their in-plan assets, including an annuity, to an individual retirement account without paying taxes on those amounts; and requires sponsors to provide participants with an annual lifetime income disclosure converting their account balance into an income stream at retirement.
"There's a recognition across the board that lifetime income products need to be built into 401(k) plans," Mr. Spence said.
Linda K. Stone, senior pension fellow at the Washington-based American Academy of Actuaries, said longevity risk is one of the biggest challenges in retirement. The academy supports the use of lifetime income options in defined contribution plans because they "reflect actuarial principles such as longevity risk pooling and institutional pricing in a cost-effective manner beyond what may be available to an individual," Ms. Stone said. "More predictable income can help retirees manage their financial security in retirement."
In the past, defined contribution plan sponsors have been hesitant to offer lifetime income options, like annuities, because they could be exposed to litigation if their provider became insolvent, Mr. Spence said. The safe harbor added in the SECURE Act will give sponsors peace of mind when they're choosing an annuity provider, he added.
Some plan sponsor groups, like the ERISA Industry Committee in Washington, take issue with bill's Lifetime Income Disclosure Act — the provision that stipulates plans must provide participants with an annual lifetime income disclosure converting their balances into a post-retirement income stream.
Aliya Robinson, senior vice president of retirement and compensation policy at ERIC, said the provision amounts to a mandate on employers and will only lead to mass confusion among participants. She said plan sponsors already provide tools, such as retirement calculators, that allow participants to enter individualized information and receive outcomes specific to them.
"ERIC strongly believes that plan sponsors should be able to continue providing this individualized information without having to also provide a generalized annuity disclosure that may or may not reflect the participants' actual realities," she said. "We look forward to working with Congress in the new year to provide this additional flexibility in the LIDA provision."
The LIDA provision will not go into effect until one year after the Department of Labor promulgates the regulation and issues a final rule, the SECURE Act instructs.
Edmund F. Murphy III, president and CEO of Empower Retirement in Denver, said while Empower supports lifetime income disclosures, the SECURE Act "does not take advantage of the latest technologies in arriving at the projection. A one-size-fits-all model will not work for all retirement savers."