U.S. Reps Introduce Bills on ERISA Litigation, Annuity Access

U.S. representatives recently introduced legislation intended to reduce litigation targeting retirement plans governed by the Employee Retirement Income Security Act. The ERISA Litigation Reform Act, introduced by Representative Randy Fine, R-Florida, would toughen pleading standards for legal complaints under ERISA.

The legislation clarifies the burden of proof in specific fiduciary-related claims and provides different standards for a court to stay discovery during the early stages of litigation. According to a November 24 press release from Fine, such standards align ERISA with established federal court practices aimed at discouraging unmeritorious lawsuits.

“American workers deserve retirement plans that are well-run and well-protected, not drained by abusive litigation tactics,” Fine said in the statement. “This bill strengthens fiduciary accountability while preventing meritless lawsuits from driving up plan costs and reducing workers’ retirement security.”

The legislation addresses the recent flood of litigation filed in district courts, which has yielded mixed success but has, recently, favored employers. The bill was referred to the House Committee on Education and the Workforce, which oversees ERISA.

Meanwhile, Representatives Jimmy Panetta, D-California, and Darin LaHood, R-Illinois, reintroduced the Retirement Simplification and Clarity Act, which would offer greater access to annuities. The bill introduces a provision for “in-service rollovers,” allowing employees greater flexibility to secure guaranteed income through annuities while they are still actively working.

The Retirement Simplification and Clarity Act, which was previously introduced in 2024, would implement recommendations from the Government Accountability Office to simplify the 402(f) notice process. A 402(f) notice is issued to employees who leave their jobs and seek to withdraw funds from their 401(k) plans, detailing their distribution choices and associated tax consequences. The bill mandates that the IRS revamp the 402(f) notice to be more accessible and understandable.

According to a release announcing the bill, the updated notice would present clear explanations of all available distribution options, such as rolling over savings into a new plan or keeping them in the current account, enabling individuals to make informed decisions regarding their retirement savings. Furthermore, the bill would expand in-service rollover options, allowing individuals aged 50 and older to transfer funds from their employer-sponsored 401(k) accounts into an annuity.

The legislation was referred to the House Committee on Ways and Means.