What SECURE Act’s Annuity, Open MEP Provisions Mean for Advisors
January 1, 2020 by Brian Anderson
Big changes are coming to 401k plans in 2020 thanks to last week’s whirlwind passage of the SECURE Act as part of the broader federal government spending bill.
Among the most significant changes are provisions focused on making it easier to include annuities in 401k plans and opening up multiple employer plans (MEPs) to small companies that don’t share a common nexus.
Industry subject matter experts have been quick to speak out on what these changes mean – and what advisors need to be focused on right now as the SECURE Act becomes law in a matter of days.
Here we take a closer look at what the experts had to tell 401k Specialist about the annuity and Open MEP provisions, while we’ll tackle additional provisions in upcoming coverage.
Though commonly offered by traditional pension plans, annuities to this point have been offered in less than 10% of 401k plans. Vanguard, for example, says annuities are currently available in only 8% of the 401ks it administers.
One of the biggest changes in the SECURE Act is a provision that provides fiduciary safe harbor to 401k plan sponsors who include annuities among offerings to plan participants, granting access to the market that insurance and financial services companies have long craved.
“As people live longer and spend more years in retirement, they need ways to tap into lifetime income solutions. This bill will expand access of guaranteed income solutions for America’s workers within workforce plans,” says Sri Reddy, senior vice president at Principal, who also serves as the chair of the ERISA Advisory Council.