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Congress Pits Insurance Firms Against Mutual Fund Interests Over 401(k) Law

December 3, 2018

A new bill recently introduced in the House of Representatives has pitted insurance industry trade groups against mutual fund companies and several retirement industry associations, according to news reports.

Introduced this week by Rep. Kevin Brady, R-Texas, the Retirement, Savings, and Other Tax Relief Act of 2018 contains a provision requiring annual 401(k) statements to translate a participant’s current account balance into hypothetical monthly payments, InvestmentNews writes.

The Insured Retirement Institute and American Council of Life Insurers have argued such a breakout is essential for retirement security, according to the publication.

Opponents say such a measure would inadvertently provide “its imprimatur to one specific product — annuities — over other investment products,” according to a letter sent Wednesday to top officials in the Senate Finance and House Ways and Means committees cited by InvestmentNews.

The group opposing the measure includes the Investment Company Institute, the American Retirement Association, and the ERISA Industry Committee, as well as mutual fund providers Fidelity Investments, Vanguard, T. Rowe Price, JPMorgan Asset Management and Charles Schwab, among others, according to the publication.

"The two sides always try to push back on each other because so much money is at stake," Philip Chao, a retirement plan advisor and principal of Chao & Co., tells InvestmentNews. "It’s all about products, which is really unfortunate."

Lawmakers insist they are trying to address what they believe is an “educational gap,” according to the publication.

Retirement savers may be led to feel like they’re prepared based on the overall defined contributions plan balance without taking into account what their desired standard of living would cost, InvestmentNews writes.

Meanwhile, such a breakout is also nothing new: statements from the federal Thrift Savings Plan — which is the largest defined-contribution plan in the U.S. — already include illustrations about what the balance translates to monthly, according to the publication.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.