The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“INTRODUCTION OF THE SECURE ANNUITY INCOME FOR LIFE ACT OF 2003” mentioning the U.S. Dept of Labor was published in the Extensions of Remarks section on pages E1246-E1247 on June 13, 2003.
The publication is reproduced in full below:
INTRODUCTION OF THE SECURE ANNUITY INCOME FOR LIFE ACT OF 2003
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HON. EARL POMEROY
of north dakota
in the house of representatives
Thursday, June 12, 2003
Mr. POMEROY. Mr. Speaker, I rise today to introduce the bi-partisan
``Secure Annuity Income for Life Act (S.A.I.L.),'' legislation co-
sponsored with Rep. Johnny Isakson (R-GA). This legislation will encourage workers to annuitize their savings to provide them with retirement income for life.
Traditionally, guaranteed monthly income sources have provided the best means of retirement income security. However, these sources are playing an ever smaller role in ensuring retirement income stability. Social Security is facing a funding challenge. The personal savings rate is at an all time low while consumer debt is at an all time high. The number of defined benefit plans, or pensions, has decreased by half since 1977--putting pressure on defined contribution plans, like the 401(k), to be the primary retirement plan.
As a result of the growth in 401(k) plans, greater amounts of retirement savings will not be annuitized. According to the Department of Labor, only 38 percent of workers in a 401(k) plan have an annuity option available to them. However, about $2.5 trillion in retirement assets are invested in individual retirement accounts (IRAs), mostly as a result of rollovers from defined contribution plans. That compares with $1.8 trillion in defined benefit plans and $2.4 trillion in defined contribution plans. The amount of IRA rollovers is expected to increase by 50% in the next ten years, mostly as a result of retirements. Workers will face a number of risks when managing these savings in retirement.
When workers take a lump sum distribution, or rolls his 401(k) savings into an IRA, they face a number of risks when managing these savings in retirement:
Unpredictable Time Horizon--Life expectancy at 65 is at least 18 years--but that is only an average and not very useful in planning. In fact, 28 percent of females that are 65 years old will live to age 90 and 17 percent of males that are 65 will live to age 90. The probability that at least one person from a married couple that is 65 years old will live to age 90 is 40 percent.
Market Risk--Retirees have a shorter time horizon in which to recover from market downturns. Market downturns at the beginning of retirement can significantly reduce how long a retiree's nest egg will last.
Inflation--Income must double over a twenty-year period just to stay even with average rates of inflation. Since most pension plans do not have cost of living income adjustments each year (unlike Social Security), personal savings experience even greater strain.
By annuitizing retirement assets--either through an employer or private commercial entity--retirees reduce the risk of retirement income instability. Public policy should encourage individuals to manage their savings during retirement in a manner that accommodates their daily needs but also ensures that their savings will not be exhausted prematurely. Only annuities can make this guarantee. Annuities transfer the risk of outliving assets from the individual to an insurance company -just as individuals transfer risks to insurance companies for their properties, accidents, and health costs.
The S.A.I.L. Act is designed to encourage individuals to annuitize their retirement savings as an efficient solution to what otherwise could be an overwhelming asset management task. Specifically, it would allow workers who participate in employer sponsored retirement savings plans, and who save through IRAs, to receive $3,000 of annual taxfree income from annuities. Some may consider this a small incentive, but it is a progressive way to entice low to moderate income individuals to annuitize some of their retirement savings.
I look forward to working with my colleagues to ensure that retirement income security encourages workers' to annuitize their savings so that they will receive guaranteed monthly income for life. I believe this is an important policy objective and encourage my colleagues to co-sponsor the bill.
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