Legislation introduced in the Senate this week would mandate that 401(k)s and other defined contribution plans show beneficiaries the value of their retirement account.
The legislation would require plan sponsors to provide data on how much income a participant’s account balance would generate each month at retirement.
The legislation, the Lifetime Income Disclosure Act, was introduced by Senators Jeff Bingaman, D-N.M.; Johnny Isakson, R-Ga.; and Herb Kohl, D, Wis.
The senators said they introduced the bill because the shift to 401(k) plans has made employees increasingly responsible for saving for retirement and managing their retirement investments.
“Many Americans are not saving enough, and they are unsure how quickly to draw down their savings in their retirement years,” they explained.
Officials of the American Council of Life Insurers, Washington, lauded the bill and urged its quick passage.
“While most workers recognize the need to accumulate retirement assets, too few think about the need to assure that those assets will last a lifetime,” said Frank Keating, president and CEO of the ACLI.
He said the legislation would help workers visualize how long their retirement savings would last as they draw down their assets over the course of retirement.
“This will help workers make better retirement planning decisions,” Keating said. “Many workers may realize they need to save more and find ways to manage their assets to last a lifetime.”
The bill is based on the Social Security Administration’s annual statements, which are mailed annually to working Americans to inform them of estimated monthly benefits based on their current earnings.
“Congress mandated annual Social Security statements in 1989, and they have proven to be very useful to workers in preparing for retirement,” the 3 senators said in explaining their bill. “By providing similar information for 401(k) plans, the bill would give American workers a more complete snapshot of their projected income in retirement.”