The legislation gives new tax incentives for annuities, imposed new employer mandates regarding sponsorship of qualified retirement plans and changed certain rules governing plan distributions, NewsEdge reported.
The thought is that both women and men would benefit from the measure, but women would especially benefit from receiving guaranteed lifetime income in retirement because they typically live longer than men, Frank Keating, the president and CEO of the American Council of Life Insurers, told the news service.
If passed, the Women’s Retirement Security Act would regard 50% of lifetime annuity payouts generated from non-qualified contracts, up to $20,000 annually, as tax free. However, for individual retirement accounts (IRAs), 401(k) plans or other employer-sponsored plans, 10% of annuitized payout, up to $2,000, would be tax free.
The act would also force employers sponsoring 401(k) plans to allow participation by part-time employees who remain with the company for a certain period of time and would also require those employers not offering retirement plans to divert a portion of workers’ paychecks into an IRA.
Supporters say the changes to the distribution rules governing qualified plans would promote the purchase of longevity insurance – or lifetime annuities whose payments are deferred to coincide with the end of beneficiaries expected life span. The value of the longevity insurance would not be considered with regard to tax-qualified plans’ minimum distribution rules, which apply at age 70.5.