Last month celebrated the end of one phase of a legislative process that may impact the tax-qualified sales of U.S. pensions, annuities and ERISA products. In support of the National Association for Fixed Annuities (NAFA), I had the opportunity to join a group of associations in visiting the offices of Senator Orrin Hatch to strategize about support for his Secure Annuities for Employee (SAFE) Retirement Act of 2013. Much work was done during these few days to contribute to the bill’s language.
The purpose of the Act is to provide new solutions for public and private pensions in the U.S. and streamline ERISA provisions, which are cumbersome and can inhibit savings. The bill allows public pensions to use insurance companies to insure these lifetime defined benefit plans. The hope is that many state and local governments, while trying to dig out from their highly underfunded and compromised pension plans, will adopt the new insurance company-offered SAFE plans, which will guarantee benefits and premiums, thereby eliminating the budgetary temptation to project overly optimistic future investment returns to mask underfunding. For private pensions, it makes starting a 401(k) easier, increases contribution limits and simplifies regulatory burdens.