Bill Overview
Title: INFORM Act
Description: This bill requires pension plan sponsors to provide certain information to participants and beneficiaries when the sponsor makes an offer to pay the plan's lifetime annuity as a lump sum. This includes the relative value of the lump sum option compared to the single life annuity and the qualified joint and survivor annuity, as well as the general tax rules for accepting such lump sum.
Sponsors: Sen. Murray, Patty [D-WA]
Target Audience
Population: Participants and beneficiaries in pension plans
Estimated Size: 48670000
- The bill specifically targets pension plan sponsors and modifies their reporting requirements.
- Only individuals who are participants or beneficiaries in pension plans will receive new documentation under this bill.
- In the United States, approximately 31% of the workforce is covered by some type of pension plan, which impacts millions of people.
- Global pension statistics indicate that many individuals worldwide are involved in pension plans, though systems differ by country.
Reasoning
- The INFORM Act focuses on providing better information to pension plan participants about their options, specifically when choosing between a lifetime annuity and a lump sum payment.
- The policy aims to improve informed decision-making, potentially increasing financial security, especially for those who are not financially literate or aware of tax implications.
- Given the large number of participants potentially impacted (around 48 million), the policy's reach and influence can be significant, but individual impact depends highly on a person's engagement with their pension options.
- The budget constraints mean that while the policy can afford coverage through enhanced informational campaigns, the broader impact might be limited by the effectiveness of these in conveying essential financial details.
- Not all pension plan participants will be facing a lump sum option, therefore the impact will vary widely, from no impact to very high for those making crucial retirement planning decisions.
Simulated Interviews
Retired engineer (Phoenix, AZ)
Age: 65 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- I appreciate the transparency this new act provides.
- Understanding the tax implications is crucial for my decision.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
School teacher (Buffalo, NY)
Age: 55 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- This wouldn't affect me at the moment, but knowing how these options compare is beneficial for the future.
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 | 7 |
Software developer (San Francisco, CA)
Age: 35 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 12/20
Statement of Opinion:
- This information will help my less-informed colleagues, but I prefer managing my investments independently.
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 |
Oil industry worker (Houston, TX)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 7/20
Statement of Opinion:
- More information on my options reduces anxiety about financial decisions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 4 |
Healthcare worker (Chicago, IL)
Age: 50 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 7.0 years
Commonness: 9/20
Statement of Opinion:
- Clarifies doubts I had about accepting the lump sum vs annuities.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Freelancer (Seattle, WA)
Age: 29 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 15/20
Statement of Opinion:
- Doesn't affect me as I'm not involved in pension plans yet.
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 |
Retired nurse (Miami, FL)
Age: 62 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 6.0 years
Commonness: 4/20
Statement of Opinion:
- Wish I had this information sooner; might have avoided financial strain.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
Warehouse manager (Denver, CO)
Age: 48 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 8.0 years
Commonness: 6/20
Statement of Opinion:
- Valuable to know about options and taxes; helps with financial planning.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Retired librarian (Baltimore, MD)
Age: 72 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- While this policy is useful for future retirees, it doesn't affect me much now.
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 | 6 | 6 |
| Year 20 | 6 | 6 |
University professor (Minneapolis, MN)
Age: 58 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 4.0 years
Commonness: 8/20
Statement of Opinion:
- Helps make better retirement decisions, reducing stress.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Cost Estimates
Year 1: $50000000 (Low: $30000000, High: $70000000)
Year 2: $48000000 (Low: $28000000, High: $68000000)
Year 3: $47000000 (Low: $27000000, High: $67000000)
Year 5: $45000000 (Low: $25000000, High: $65000000)
Year 10: $43000000 (Low: $23000000, High: $63000000)
Year 100: $40000000 (Low: $20000000, High: $60000000)
Key Considerations
- The primary challenge is ensuring that pension plan sponsors have the necessary systems and resources to comply with the reporting requirements.
- Companies will likely need to invest in short-term upgrades and processes.
- The policy supports informed decision-making for pensioners, potentially improving their financial security.
- There may be resistance from smaller plan sponsors due to the additional reporting burden.