SECURE Act Lifetime Income Q&As

The SECURE Act includes three specific provisions that address lifetime income: a fiduciary safe harbor for the selection of a lifetime income provider; portability of lifetime income options if a lifetime income investment is no longer authorized to be held as an investment option under the plan; and lifetime income disclosures.

Q1: How does the lifetime income portability impact existing plans with lifetime income options already offered? Is that not grandfathered and therefore not portable?

A1: We have no reason to believe that it would be grandfathered.

Q2: Annuities: M&E fees, rider fees, cost and surrender fees (typically surrender fees are attached to each deposit made). What if a participant changes their mind and no longer wants an annuity? Does the participant have to choose single life or joint life when the election is made? What happens if a participant gets divorced, or is single at election and later gets married?

A2: The SECURE Act only provides relief where a participant is forced out of an annuity because of a plan decision to no longer permit them. It does not provide relief due to participant-initiated actions. In addition, it does not change what actions trigger fees—that depends on the contracts.

Q3: Lifetime income: What if the 401(k) plan is a mutual fund platform, meaning, for example, at Fidelity? If the 401(k) plan wants to add lifetime income, will this feature be added to the existing mutual fund platform or does that mean that 401(k) plan will need to start working with an insurance company? Additionally, how does a Fidelity customer service representative answer annuity questions if not insurance licensed?

A3: Companies over time will begin to develop more annuity products that may be offered on the platform or are stand-alone. How it gets offered in platforms will depend on the providers.

Q4: Annuity in 401(k)s: Would the participant just select the annuity (like any other platform choice) or would they have to fill out annuity paperwork?

A4: It will depend on the product.

The topics addressed on this page are for information purposes only and should not be construed as specific tax or retirement plan advice. Individuals should consult a tax advisor or attorney for questions regarding specific tax or legal needs.