The US Departments of Labor and the Treasury announced, following the President’s State of the Union Address, two executive actions to help Americans save for retirement and to plan for longevity, as well as to increase transparency regarding their 401K plan options. According to the Departments of Labor and the Treasury, the executive actions are particularly important for women, who tend to live longer than men and thus need greater savings.
The executive actions will revise a previous regulation to allow Americans to consider partial annuities, “which allow retirees to receive a steady stream of income for the duration of their lifetimes while also keeping a portion of their savings invested in assets with the flexibility to respond to liquidity needs.” The executive actions will also clarify lifetime income option policies for employees and their spouses. As a result of the first ruling, employees could obtain a low-cost annuity from their employer’s pension plan using a single-sum 401K payout. The second ruling will allow employers to give their employees the option of using their 401K savings “to purchase deferred annuities and still satisfy spousal protection rules with minimal administrative burdens.”
Treasurer Secretary Tim Geithner stated, “When American workers take the responsible step of saving for retirement, we should do all we can to provide them with sensible, accessible choices for managing their hard-earned savings. Having the ability to choose from expanded options will help retirees and their families achieve greater value and security.”
US Labor Secretary Hilda Solis added, “This common sense rule greatly benefits employers by enhancing the information service providers must disclose to them about the costs associated with providing workplace retirement plans. This rule, and its companion participant-level fee disclosure rule, bring transparency to retirement saving. The rules will enable businesses that sponsor retirement plans, and the workers who participate in the plans, to make better decisions about those plans, the fees they pay, and their investments, leading to cost savings for retirement savers nationwide.”
Statement of US Treasury and Labor Departments 2/2/12