The House was scheduled to pass at press time legislation reforming the defined benefit pension system that includes several provisions sought–some for a number of years–by the life insurance industry.
Most notably, the industry won support in the bill for provisions that would encourage employers to offer automatic enrollment in 401(k) plans as well as allow the sale of a “combination insurance product” that permits annuities to include riders for long term care coverage.
Additionally, the legislation would clarify the rules governing the selection of an annuity by an employer, and the options an employer can offer an employee for their 401(k) program. “Presently, the rules are unclear, giving an employer pause before offering an employee an annuity,” said Jack Dolan, a spokesman for the American Council of Life Insurers.
Another provision in the bill would allow for financial services companies that manage a pension plan to provide investment advice to employees participating in that plan, with disclosures about their relationship.
“It would remove the legal hurdles that have discouraged employers from offering investment advice at the workplace,” Dolan said. “Presently, financial services firms can provide retirement plans, they can provide educational materials, but they cannot provide advice. It makes sense to allow those firms and representatives that already are helping workers plan for retirement to take the next step, which is advice giving.”
Because the House bill is substantially different than a Senate bill dealing with the same issue, final legislation will not be enacted before the first quarter of next year, industry analysts said.
The bill, known as the Pension Protection Act, or H.R. 2830, is designed to protect defined benefit pension plans by requiring more accurate measures of funding and increased disclosure of funding levels.
The Senate passed its version of pension legislation last month.
Provisions sought by the insurance industry also are included in that bill.
For example, the Senate bill contains a provision codifying into federal law current corporate-owned life insurance “best practices.” The provision would effectively limit COLI to coverage of highly compensated employees and require the consent of insured individuals.
“This legislation is long overdue,” Dolan said. “Workers are largely responsible for their own financial futures. It makes sense to give them the tools that will help them make the wise investment choices.”