Summary: Setting Every Community Up for Retirement Enhancement (SECURE) Act 

Expanding Access to Lifetime Income

What Employers Need to Know

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was passed by Congress and signed into law in late 2019, is designed to enhance workplace defined contribution (DC) retirement plans (e.g., 401(k) plans) by removing regulatory obstacles and expanding access to savings and lifetime income. While there are many provisions included in the law, there are two specific provisions that MetLife thinks are particularly important to employers and their employees.

The Safe Harbor for Annuity Carrier Selection

This safe harbor provides employers protection when they select an insurer to provide an annuity as a distribution option in their 401(k) plan. It replaces the former rules, which required an employer to look at the capital requirements, liquidity and solvency of an insurer for the duration of an annuity contract. This previous guidance was not sufficient to enable—much less encourage—employers to enhance their plans to offer a guaranteed lifetime income option. This law allows employers to simply rely on state insurance regulation and a written representation from the insurer confirming an insurer’s solvency at the time of carrier selection.

The Lifetime Income Disclosure Requirement

The Lifetime Income Disclosure provision requires annual plan statements to include the monthly income equivalent of an employee’s savings. Under the law, an individual’s current retirement plan balance must be illustrated as if they were receiving a monthly paycheck for life, based on assumptions prescribed by the U.S. Department of Labor in late 2021. Seeing the lifetime income equivalent will enable employees to be better informed about how much they need to save to meet their retirement goals and how to make their savings last. This type of illustration is already in place for defined benefit pension plan and Social Security statements.

SECURE 2.0

The SECURE 2.0 Act of 2022, which was signed into law on December 29, 2022, paves the way for Qualifying Longevity Annuity Contracts (QLACs), a type of longevity insurance, to be more accessible for DC plan participants. QLACs, which are fixed deferred annuities, are typically purchased at the point of retirement (e.g., age 65), with the guaranteed annuity benefit commencing at an advanced age, typically age 80 or 85, and meeting certain other requirements.

Section 202 of Secure 2.0 eliminates the 25% threshold, increases the dollar limit to $200,000 (indexed for inflation), and clarifies that survivor benefits may be paid in the case of divorce and free-look periods are permitted, but not required, allowing the annuity purchaser to cancel the annuity for up to 90 days with respect to contracts purchased (or received in an exchange) on or after July 2, 2014. The Secretary of the Treasury (or the Secretary’s delegate) has 18 months from the enactment of Secure 2.0 to amend the regulation issued by the Department of the Treasury relating to ‘‘Longevity Annuity Contracts’’ (79 Fed. Reg. 37633 (July 2, 2014)).

Why is This Important to you and your employees?

Today, employees need to figure out how much to save for retirement, how much they can draw down from their savings in retirement, and how long they are likely to live. MetLife research found that many individuals who take lump sums from their defined contribution plans deplete their money too quickly relative to their life expectancy, with one in three individuals running through all of their money in an average of five years.₁ Running out of retirement savings can potentially leave individuals to fund a significant portion of their retirement years with no income other than Social Security.

A guaranteed stream of income makes planning and budgeting easier, and helps avoid the risk of overspending or underspending in retirement. The good news is that nine in 10 pre-retirees (90%) and retirees (89%) and feel it’s valuable (i.e., very important or absolutely essential) to have a guaranteed monthly income (i.e., a retirement “paycheck”) to pay their bills.₁

What Can you do Next?

As you seek to strengthen and enhance your company’s 401(k), or other type of DC plan, MetLife is uniquely qualified to partner with you and serve as your annuity provider. Please contact your MetLife representative below to learn about our commitment and experience in helping Americans achieve successful retirement outcomes.

Please Contact a Member of our Team for More Information:

Patrick Goessling
Sales Director, Western Region
314-930-8564
patrick.goessling@metlife.com

David Nastasi
Sales Director, Eastern Region
610-684-5695
david.nastasi@metlife.com