(Washington, D.C.) – U.S. Senators Tina Smith (D-MN), Patty Murray (D-WA), and Tammy Baldwin (D-WI) reintroduced the Information Needed for Financial Options Risk Mitigation (INFORM) Act of 2022, which would require pension plan sponsors to provide retirees and participants with critical information about the trade-offs involved when they offer a lump-sum buyout of their lifetime retirement plans and protect families’ savings.
“After putting in a lifetime of work, retirees deserve to understand how a lump-sum buyout of their hard-earned pensions could impact their retirement plans,” said Senator Smith. “This commonsense bill would ensure hardworking Americans are given that clear information they need to make informed decisions about their financial future.”
“No one’s retirement planning should be put at risk because they didn’t have the information they needed before making a big decision about whether to trade their lifetime pension payments for a one-time buyout,” said Senator Murray. “After working for decades to earn a retirement, people deserve to have better information about how a lump-sum buyout of their lifetime pension could undermine their financial future—and my commonsense bill will make sure they have that information so they can make an informed decision.”
“Wisconsin retirees and their families deserve the pensions they have worked towards, planned for, and depend on,” said Senator Baldwin. “Our legislation will ensure that retirees are aware of the trade-offs involved in one-time pension buyouts so they can make informed decisions to protect their financial future and enjoy their hard earned retirement.”
Lump-sum buyouts allow pension plans to make a one-time payment to retirees and participants—in lieu of the lifetime payments to which they would otherwise be entitled. Pension plan sponsors typically offer buyouts to reduce their corporate liabilities—but the buyouts transfer all risk from employers to retirees and, on average, leave them with less money than they would receive if they had kept their lifetime retirement plan. Buyouts also leave people on their own to manage the challenge of making these assets last as long as they are needed. As one recent report found, one in three who took lump-sum buyouts from their retirement accounts depleted them within just five years.
The INFORM Act would require plan sponsors to send a notice to retirees and participants 90 days before the period in which they must make a decision about the offer. That notice must provide:
- A comparison of benefits offered under the plan and the buyout offer;
- An explanation of how the lump sum was calculated;
- The ramifications of accepting a lump sum (such as the loss of certain federal protections); and
- Details about the election period, where to follow up with questions, and other essential information.
The legislation would also require plan sponsors to disclose buyouts to the Department of Labor so that it can collect information on the practices.
The National Retiree Legislative Network (NRLN) and Pension Rights Center (PRC) have endorsed the legislation. Senators Murray, Smith, and Baldwin first introduced the bill last Congress.
A fact sheet on the INFORM Act is available here.
Full text of the legislation is available here.