Bill Overview
Title: Lifetime Income For Employees Act
Description: This bill allows fiduciaries of pension plans to make default investment arrangements in annuity contracts upon providing certain notice to plan participants or beneficiaries and complying with certain prohibitions on liquidity restrictions.
Sponsors: Rep. Norcross, Donald [D-NJ-1]
Target Audience
Population: People participating in employer-sponsored pension plans
Estimated Size: 60000000
- Pension plans are often components of retirement plans offered by employers to employees. Annuitization impacts employees saving for retirement.
- Employees participating in retirement savings plans, particularly those with defined contribution plans like 401(k)s, would be impacted since their default investment could be an annuity.
- An amendment to pension default investment options largely impacts working-aged populations who are currently saving for retirement through employer-sponsored plans.
- Global workforce includes many who currently save via pension schemes, though the provision of annuity default options might focus on markets with higher pension uptake.
Reasoning
- Since the target population includes employees involved in employer-sponsored retirement plans, a significant portion of the interviewed population will likely include individuals actively contributing to such plans.
- The diversity in the simulated interviews allows us to better understand the range of impacts and perspectives. It is important to include individuals of varying ages, income levels, and professional backgrounds as it impacts the benefits realized from annuity arrangements.
- We expect the impact on wellbeing to vary based on factors such as individuals' understanding of annuities, their risk tolerance, and trust in the financial system.
- The budget constraint implies that the reach and extent of the policy's rollout may not affect every participant—smaller corporations or plans might not immediately switch.
- As annuities can provide guaranteed income, those closer to retirement might see a greater impact, while younger employees might not fully perceive the benefits immediately.
- The budget and estimated participation numbers mean that not all beneficiaries will necessarily experience the same level of impact.
Simulated Interviews
Software Engineer (Chicago, IL)
Age: 32 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- I'm generally supportive of anything that assures income during retirement.
- However, I'm concerned about the lack of liquidity with annuities.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 9 | 8 |
Middle-manager in Retail (Austin, TX)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- Not sure how I feel about my retirement account going into less liquid investments.
- I was hoping to manage my future funds more flexibly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Technical Writer (Orlando, FL)
Age: 58 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 9/20
Statement of Opinion:
- The security of an annuity sounds great as I'm approaching retirement.
- My main concern is whether it's the best decision financially.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 7 |
Marketing Specialist (San Francisco, CA)
Age: 28 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 2.0 years
Commonness: 13/20
Statement of Opinion:
- An annuity for my retirement seems distant.
- I prefer having control over my investments during my early career.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Financial Analyst (New York, NY)
Age: 35 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 11/20
Statement of Opinion:
- I see the potential in annuity-based defaults for some risk-averse colleagues.
- For me, it mainly complicates my strategy.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Construction Worker (Seattle, WA)
Age: 51 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- I'm worried about what happens if the company mismanages the pensions.
- Annuities sound stable though.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Nurse (Phoenix, AZ)
Age: 62 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 7/20
Statement of Opinion:
- It's about time there's a more guaranteed option like annuities for retirement.
- I wish it was available sooner.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Freelance Graphic Designer (Portland, OR)
Age: 40 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- As a self-employed individual, this policy doesn't seem to apply to me.
- It might be helpful for employees who don't manage their own savings.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Teacher (Denver, CO)
Age: 29 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 3.0 years
Commonness: 14/20
Statement of Opinion:
- More concerned about student loans than retirement right now.
- I see potential value for older colleagues.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Tech Startup Employee (Los Angeles, CA)
Age: 30 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- I like having a choice and control in my investments.
- Annuities feel a bit unusual for tech company pensions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Cost Estimates
Year 1: $100000000 (Low: $75000000, High: $150000000)
Year 2: $90000000 (Low: $70000000, High: $130000000)
Year 3: $85000000 (Low: $65000000, High: $125000000)
Year 5: $80000000 (Low: $60000000, High: $120000000)
Year 10: $75000000 (Low: $55000000, High: $110000000)
Year 100: $50000000 (Low: $35000000, High: $75000000)
Key Considerations
- Shifts in default investment options impact fiduciary approach and necessitate new legal compliance mechanisms.
- Adoption rates of annuity defaults will vary by employer and regional economic climates.
- Potential resistance from employees preferring flexible investment choices over fixed annuity options.