What You Need to Know
- Federal law already requires consent from the spouse when a married pension plan participant cashes out.
- No such federal requirement applies to married defined contribution plan participants.
- Two lawmakers hope to change that.
Two House members want to make it harder for one angry, or irresponsible, spouse from wiping out a couple’s retirement plan assets.
The lawmakers, Reps. Lucy McBath, D-Ga., and Lauren Underwood, D-Ill., are seeking co-sponsors for a draft bill that could require a married 401(k) plan participant to get permission from the other spouse before taking lump sums of cash out of a 401(k) plan.
McBath talked about the bill last week, during a hearing organized by the House Health, Employment, Labor and Pensions Subcommittee.
McBath said the draft bill would require a married participant’s permission to withdraw assets in the form of a lump sum of cash, or to roll assets into an arrangement beyond the reach of the other spouse.
A married participant would not have to get consent from the spouse to receive plan benefits in the form of a joint and survivor spousal annuity, or to roll the assets into another employer-sponsored retirement plan or individual retirement arrangement that provided protection for the spouse, McBath said.
Amy Matsui, director of income security at the National Women’s Law Center, said federal legislation is necessary because of the gap between the current rules for defined benefit pension plans and defined contribution retirement plans.