Senate Bill Includes Significant Changes to Retirement System
Inside the spending legislation the Senate passed on Thursday are the most significant changes in more than a decade to the nations retirement system.
One prominent provision of the law, which President Trump is expected to sign, encourages 401(k) plans to replicate a feature of old-fashioned pensions by offering products with guaranteed income payments.
The law also seeks to expand retirement plan coverage by making it easier for small companies to join together to offer 401(k) plans and spread the burden of administrative costs. An estimated 30% of private sector employees work for employers that dont currently offer a way to save for the future.
With the U.S. population aging and employers shifting responsibility for retirement saving to individuals, lawmakers have grown concerned that a significant portion of Americans are at risk of outliving their money.
The nonprofit Employee Benefits Research Institute says Americans between ages 35 and 64 face a retirement savings shortfall of $3.83 trillion, with 41% of households projected to run short of money in later life.
To help participants figure out how to make their savings last, the law makes it easier for employers to offer annuities in 401(k)-type retirement plans. It protects employers that follow certain procedures from being sued if they select an insurance company to make annuity payments and that insurer later fails to pay claims. Annuity contracts guarantee a monthly stream of income, potentially for as long as a retiree lives.
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