Pension policy specialists have explained why you might care about “portability” — one of the little-discussed, complicated-sounding provisions in the major retirement bills now in play in Congress.
The explanation boils down to this: The current lack of portability could be extremely mean to clients who start out in a 401(k) plan with a lifetime benefits annuitization option.
A team at the Georgetown University Center for Retirement Initiatives and a team at Willis Towers Watson have included the explanation in a look at the retirement income options available in 401(k) plans and other defined contribution retirement plans, such as 457 plans.
The teams prepared the review to support the idea that regulators and policymakers should do more to encourage retirement plan sponsors to offer annuitization options, or other features that a participant can use to convert account value into a lifetime stream of income.
About 26% of the sponsors that participated in a Cerulli Associates survey said they frequently offered retired or separated participants access to a qualified plan distributed annuity, according to a study cited by the policy specialists.
The plan participants in plans with recordkeepers that offer an annuitization are getting access to a valuable benefits, the policy specialists say.
Today, the policy specialists say, under the current rules, when an employer changes recordkeepers, the annuitization option could simply disappear.