INFORM Act

II 116TH CONGRESS 2D SESSION S. 3417 To require pension plans that offer participants and beneficiaries the option of receiving lifetime annuity payments as lump sum payments, to meet certain notice and disclosure requirements. IN THE SENATE OF THE UNITED STATES MARCH 9, 2020 Mrs. MURRAY (for herself, Ms. SMITH, and Ms. BALDWIN) introduced the fol- lowing bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To require pension plans that offer participants and bene- ficiaries the option of receiving lifetime annuity payments as lump sum payments, to meet certain notice and disclo- sure requirements. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Information Needed 4 for Financial Options Risk Mitigation’’ or the ‘‘INFORM 5 Act’’. 6 VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS 2 •S 3417 IS SEC. 2. NOTICE AND DISCLOSURE REQUIREMENTS WITH 1 RESPECT TO CERTAIN LUMP SUM OPTIONS. 2 (a) IN GENERAL.—Part 1 of subtitle B of title I of 3 the Employee Retirement Income Security Act of 1974 4 (29 U.S.C. 1021 et seq.) is amended by adding at the end 5 the following: 6 ‘‘SEC. 112. NOTICE AND DISCLOSURE REQUIREMENTS WITH 7 RESPECT TO LUMP SUM OPTIONS. 8 ‘‘(a) IN GENERAL.—A plan sponsor of a pension plan 9 that amends the plan to provide a period of time during 10 which certain participants or beneficiaries who are receiv- 11 ing or will receive lifetime annuity payments into a lump 12 sum under section 401(a)(9)(A)(i) of the Internal Revenue 13 Code of 1986 shall provide notice— 14 ‘‘(1) to each participant or beneficiary offered 15 such lump sum amount, in paper form and mailed 16 to the last known address of the participant or bene- 17 ficiary, not later than 90 days prior to the first day 18 on which the participant or beneficiary may make an 19 election with respect to such lump sum; and 20 ‘‘(2) to the Secretary, not later than 30 days 21 prior to the first day on which participants and 22 beneficiaries may make an election with respect to 23 such lump sum. 24 ‘‘(b) NOTICE TO PARTICIPANTS AND BENE- 25 FICIARIES.— 26 VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS 3 •S 3417 IS ‘‘(1) CONTENT.—The notice required under 1 subsection (a)(1) shall include the following: 2 ‘‘(A) Available benefit options, including 3 the estimated monthly benefit that the partici- 4 pant or beneficiary would receive at normal re- 5 tirement age (if not already in pay status), 6 whether there is a subsidized early retirement 7 option, the monthly benefit amount if payments 8 begin immediately, and the lump sum amount 9 available if the participant or beneficiary takes 10 the option. 11 ‘‘(B) An explanation of how the lump sum 12 was calculated, including the interest rate, mor- 13 tality assumptions, and whether any additional 14 plan benefits were included in the lump sum, 15 such as early retirement subsidies. 16 ‘‘(C) The relative value of the lump sum 17 option compared to the plan’s lifetime annuity, 18 in comparable terms. 19 ‘‘(D) Whether it would be possible to rep- 20 licate the plan’s stream of payments by pur- 21 chasing a comparable retail annuity using the 22 lump sum. 23 ‘‘(E) The potential ramifications of accept- 24 ing the lump sum, including possible benefits, 25 VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS 4 •S 3417 IS investment risks, longevity risks, loss of protec- 1 tions guaranteed by the Pension Benefit Guar- 2 anty Corporation (with an explanation of the 3 monthly benefit amount that would be protected 4 by the Pension Benefit Guaranty Corporation if 5 the plan is terminated with insufficient assets 6 to pay benefits), loss of protection from credi- 7 tors, loss of spousal protections, and other pro- 8 tections under this Act that would be lost. 9 ‘‘(F) General tax rules related to accepting 10 a lump sum, including rollover options and 11 early distribution penalties with a disclaimer 12 that the plan does not provide tax, legal, or ac- 13 counting advice and a suggestion that partici- 14 pants and beneficiaries consult with their own 15 tax, legal, and accounting advisors before deter- 16 mining whether to accept the offer. 17 ‘‘(G) How to accept or reject the offer, the 18 deadline for response, and whether a spouse is 19 required to consent to election. 20 ‘‘(H) Contact information for the point of 21 contact at the plan sponsor for participants to 22 get more information or ask questions about 23 the option. 24 ‘‘(I) A statement that— 25 VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS 5 •S 3417 IS ‘‘(i) financial advisers may not be re- 1 quired to act in the best interests of par- 2 ticipants and beneficiaries with respect to 3 determining whether to take the option; 4 and 5 ‘‘(ii) participants and beneficiaries 6 seeking financial advice should get written 7 confirmation that the adviser is acting as 8 a fiduciary to the participant or bene- 9 ficiary. 10 ‘‘(2) PLAIN LANGUAGE.—The notice under this 11 subsection shall be written in a manner calculated to 12 be understood by the average plan participant. 13 ‘‘(c) NOTICE TO THE SECRETARY.—The notice re- 14 quired under subsection (a)(2) shall include the following: 15 ‘‘(1) The total number of participants and 16 beneficiaries eligible for such lump sum option and 17 the number of such participants and beneficiaries 18 who are in pay status during the limited period in 19 which the lump sum is offered. 20 ‘‘(2) The length of the limited period during 21 which the lump sum is offered. 22 ‘‘(3) An explanation of how the lump sum was 23 calculated, including the interest rate, mortality as- 24 sumptions, and whether any additional plan benefits 25 VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS 6 •S 3417 IS were included in the lump sum, such as early retire- 1 ment subsidies. 2 ‘‘(4) A copy of the notice provided to partici- 3 pants and beneficiaries under subsection (b). 4 ‘‘(d) POST-OFFER REPORT TO THE SECRETARY.— 5 ‘‘(1) IN GENERAL.—Not later than 60 days 6 after the conclusion of the limited period during 7 which participants and beneficiaries in a plan may 8 accept a plan’s offer to convert their annuity into a 9 lump sum as generally permitted under section 10 401(a)(9) of the Internal Revenue Code of 1986, a 11 plan sponsor shall submit a report to the Secretary 12 that includes— 13 ‘‘(A) the number of participants and bene- 14 ficiaries who accepted the lump sum offer and 15 a breakdown of the number of those partici- 16 pants and beneficiaries who were in pay status; 17 and 18 ‘‘(B) the number and nature of questions 19 that the plan sponsor received from participants 20 and beneficiaries about the offer. 21 ‘‘(2) CIVIL PENALTIES.—The Secretary may as- 22 sess a civil penalty of up to $1,000 a day from the 23 date of any plan administrator’s failure or refusal to 24 file a report required under paragraph (1). 25 VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS 7 •S 3417 IS ‘‘(e) PUBLIC AVAILABILITY.—The Secretary shall 1 make the information provided in the notice to the Sec- 2 retary required under subsection (a)(2) and in the post- 3 offer reports submitted under subsection (d)(1) publicly 4 available. 5 ‘‘(f) GUIDANCE AND REGULATIONS.—The Sec- 6 retary— 7 ‘‘(1) not later than 180 days after the date of 8 enactment of the Information Needed for Financial 9 Options Risk Mitigation, shall issue guidance and 10 model notices for plan sponsors to use in providing 11 the notice described in subsection (b); and 12 ‘‘(2) may promulgate such other regulations as 13 may be necessary to carry out this section. 14 ‘‘(g) BIANNUAL REPORT.—Not later than 6 months 15 after the date of enactment of the Information Needed for 16 Financial Options Risk Mitigation and every 6 months 17 thereafter, the Secretary shall submit to Congress a report 18 that summarizes the notices and post-offer reports re- 19 ceived by the Secretary under subsections (c) and (d) dur- 20 ing the applicable reporting period.’’. 21 (b) CLERICAL AMENDMENT.—The table of contents 22 in section 1 of the Employee Retirement Income Security 23 Act of 1974 is amended by inserting after the item relat- 24 ing to section 111 the following new item: 25 VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS 8 •S 3417 IS Sec. 112. Notice and disclosure requirements with respect to certain lump sum options. (c) ENFORCEMENT.—Section 502 of the Employee 1 Retirement Income Security Act of 1974 (29 U.S.C. 1132) 2 is amended— 3 (1) in subsection (c)(1), by striking ‘‘or section 4 105(a)’’ and inserting ‘‘, section 105(a), or section 5 112(a)’’; and 6 (2) in subsection (a)(4), by striking ‘‘105(c)’’ 7 and inserting ‘‘section 105(c) or 112(a)’’. 8 (d) EFFECTIVE DATE.—The amendments made by 9 subsections (a), (b), and (c) shall take effect on the date 10 of enactment of this Act. 11 Æ VerDate Sep 11 2014 03:18 Mar 11, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S3417.IS S3417 kjohnson on DSK79L0C42PROD with BILLS