WASHINGTON - U.S. Senators Jeff Bingaman (D-NM), Johnny Isakson (R-GA), and Herb Kohl (D-WI) today introduced legislation to help Americans ensure they do not outlive their retirement savings. 
With the shift to 401(k) plans, American workers have become increasingly responsible for saving for and managing their retirement investments.  However, many Americans are not saving enough, and they are unsure how quickly to draw down their savings in their retirement years. 
The Senators' Lifetime Income Disclosure Act would require 401(k) plan sponsors to inform participating workers of the projected monthly income they could expect at retirement based on their current account balance.  The measure is patterned on the Social Security Administration's annual statements, which are mailed annually to working Americans to inform them of estimated monthly benefits based on their current earnings.  Congress mandated annual Social Security statements in 1989, and they have proven to be very useful to workers in preparing for retirement.
By providing similar information for 401(k) plans, the Lifetime Income Disclosure Act would give American workers a more complete snapshot of their projected income in retirement.
"It is estimated that half of American households will lack sufficient retirement income to maintain their pre-retirement standard of living.  Yet many Americans are unaware of their financial vulnerability.  Our bill is a common-sense approach to empowering Americans, and helping them determine whether they are on a path to a secure retirement," said Bingaman, a long-time Senate leader on retirement issues. 
"Defined contribution plans such as 401(k)s are the retirement plans of the present and future," Isakson said. "This bill will enable participants to receive additional, helpful information so they can better plan for their retirement."
"In our 401(k) system, it is not enough that participants make the choice to save.  Then they have to decide how much to save, where to invest their savings, and how to make the best use of it when they retire.  This bill will help millions of Americans make the best choices for a secure retirement," said Kohl, Chairman of the Special Committee on Aging.
Leading retirement policy advocates agree that this approach will strengthen Americans' retirement preparedness. "Preparing for retirement can be a daunting process," said Nancy LeaMond, Executive Vice President at AARP. "AARP believes the Lifetime Income Disclosure Act will improve an individual's understanding of the retirement income produced from their 401(k) accounts, leading to more informed decision making about retirement needs. AARP commends the bipartisan leadership on this critical initiative."
"We applaud Senators Bingaman, Isakson, and Kohl for addressing the most significant risk women face in retirement - that they will run out of money," said Cindy Hounsell, President of the Women's Institute for a Secure Retirement.  "Planning for the long-term and recognizing the importance of income for life is key for all women. The sooner women can take steps to prepare for their income needs in retirement, the better off they will be."
Said David John, Senior Research Fellow at the Heritage Foundation and Principal of the Retirement Security Project: "Sometimes a simple common sense change has the biggest effect.  Including a disclosure of how much monthly income a worker can expect from 401(k) savings will encourage younger workers to save more for retirement, and older ones to convert their savings into annuity-like products so that they won't outlive their savings.  The Act will build greater retirement security for everyone at virtually no cost to the taxpayers, employers, or workers."
Specifically, under the Act, defined contribution plans subject to ERISA - including 401(k) plans - would be required annually to inform participants of how the account balance would translate into guaranteed monthly payments - a "retirement paycheck for life" - based on age at retirement and other factors.
To ensure there is no material burden or potential liability on employers who voluntarily sponsor 401 (k) plans, the legislation directs the Department of Labor issue tables that employers may use in calculating an annuity equivalent, as well as a model disclosure.  Employers and service providers using the model disclosure and following the prescribed assumptions and DOL rules would be insulated from liability.
Bingaman and Isakson are senior members of the Senate Health, Education, Labor and Pensions (HELP) Committee, which has jurisdiction over 401(k) plan disclosures; Kohl is chairman of the Senate Aging Committee.
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