Senate legislation (S 4087) would require pension plan sponsors offering terminated vested participants a lump-sum window to provide information to help them understand the financial trade-offs of choosing a lump sum over an annuity. The bill also would require a sponsor to report information about the lump-sum window to the Department of Labor (DOL) and the Pension Benefit Guaranty Corp. (PBGC) before and after offering the window.
The Information Needed for Financial Options Risk Mitigation (INFORM) Act of 2022, first introduced in the last Congress, was reintroduced on April 26 by Sens. Patty Murray, D-WA, chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, Tina Smith, D-MN, and Tammy Baldwin, D-WI. Under the bill, employers would have to send a notice to participants and beneficiaries offered a lump-sum option to replace their annuity payments at least 90 days before the election period begins. That notice must provide:
The bill directs DOL to issue a model notice, additional guidance and any necessary regulations within 180 days of the bill’s enactment.
The bill would also require sponsors to provide the following information to DOL and PBGC at least 30 days before the window opens:
Within 90 days after the window closes, sponsors would have to send a “post-offer report” to DOL detailing how many participants and beneficiaries elected the lump sum and any other information DOL requires in regulations or other guidance.
A fact sheet accompanying the bill cited a 2015 Government Accountability Office (GAO) report concluding that participants need better information when presented with a choice between a lump-sum payment and an annuity. The senators also noted a recent survey indicating that a third of respondents who took lump sums from their defined contribution plans depleted their funds within an average of five years.
The HELP Committee is developing a wide-ranging “SECURE 2.0 bill,” building on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (Div. O of Pub. L. No. 116–94). Expected to be introduced within weeks, the bill focuses on changes to ERISA and could incorporate the INFORM Act. Also coming soon is a separate SECURE 2.0 measure containing tax-related provisions from the Senate Finance Committee. The two committee products will be merged into a single Senate bill at some point, and the proposed lump-sum disclosures may survive if they can win broad bipartisan support, which may be possible in light of Sen. Bill Cassidy’s (R-LA) co-sponsorship of the INFORM Act.
Any Senate measure would need to be reconciled with major SECURE 2.0 legislation recently passed by the House, the Securing a Strong Retirement Act (HR 2954). While the outlook is uncertain, strong bipartisan support in both chambers for passing a SECURE 2.0 package suggests that Congress could send a bill to the president this year, most likely as part of larger must-pass legislation during a post-election lame-duck session.