This week, U.S. Sens. Patty Murray, D-Washington, and Richard Burr, R-North Carolina, wrote an open letter to the Government Accountability Office calling on the agency to examine the need for stronger spousal protections in defined contribution retirement plans.
Murray is the current chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, while Burr is the ranking Republican member. Despite their ideological differences, both senators are known for activism in the area of retirement security, having publicly agreed on various occasions that retirement security policies represent a rare opportunity for genuine bipartisanship in the current Congress.
In the new letter, the senators note that many Americans plan their futures around their DC retirement accounts. However, unlike in defined benefit pension plans, DC 401(k) plans lack protections to prevent one spouse from independently undermining a couple’s retirement resources.
“Under current law, one spouse could take a withdrawal from their account without the other spouse’s knowledge or consent,” the senators write. “This could have a devastating effect on the unknowing spouse and family members, especially if they are less familiar with the household’s finances.”
The senators’ letter explains how, if a DB plan participant dies before beginning to draw a benefit, their pension plan must provide a qualified preretirement survivor annuity to the spouse. If a participant dies after commencement of benefits under the plan, then the surviving spouse will receive a qualified joint and survivor annuity equal to 50% of the participant’s benefit. Before a participant can forgo either of these survivor options, the participant must first get the special written permission of the spouse. The same is true for participants in the Federal Thrift Savings Plan.
The senators say currently there are no such protections on the DC side. As such, the senators point to a series of questions they want the GAO to answer, which may in turn lead to legislative action. They suggest GAO explore the following:
- How often are withdrawals made from DC retirement accounts involving married couples?
- In what circumstances is a married participant able to withdraw money from a DC plan without spousal consent?
- What is known about the effect on their spouse?
- What are the perspectives of plan participants and spouses on distributions where spousal consent is not required?
- How could the spousal protections for DB plans and the Federal Thrift Savings Plan be applied to the DC plan regime?
- How could the administrative burdens on plan sponsors and recordkeepers in connection with DC spousal protections be eased?
- What impact would remote witnessing of written consent agreements to withdrawals or change of beneficiary have on the consent of the spouse?
- Under what circumstances would obtaining spousal consent prior to a DC plan withdrawal or change of beneficiary be inappropriate?
The full text of the letter is available here.