Democratic bill would require spousal consent for 401(k) distributions

Democratic bill would require spousal consent for 401(k) distributions
Legislation would extend spousal protections used in pensions to defined-contribution plans.
AUG 07, 2023

Spousal consent would be required to start most distributions from 401(k) plans, under two companion bills sponsored by Democrats in Congress.

The legislation aims to make defined-contribution plans more similar to traditional pensions in that regard. Unlike defined-benefit plans, DC plans aren't legally required to make account holders get sign-off from a spouse when initiating payouts other than required minimum distributions or those made in the form of one of a few types of annuities, such as qualified joint and survivor annuities.

Those bills, sponsored by Rep. Lauren Underwood, D-Ill., and Sen. Tammy Baldwin, D-Wis., were introduced in late July. The provisions in the legislation are not new, having been included last year as part of a wider bill titled "Protecting America’s Retirement Security Act of 2022."

The issue around protections for spouses in DC plans was highlighted this year in AARP's policy book for the current session.

“Such protection for spouses is unavailable in individual retirement accounts and rare in DC plans. Thus, employees can withdraw and use 401(k) and IRA assets without spousal consent,” that group wrote. “This is a serious shortcoming. However, when designating who should be the beneficiary in the case of death, DC participants cannot specify a beneficiary other than the spouse.”

Although employer-sponsored DC plans like 401(k)s can include provisions requiring spousal consent, they do not have to, and many do not.

The full text of the two recent bills was not yet available on Congress’ site. Underwood’s office did not respond by press time for a copy of the proposed bill, which has been referred to committee.

The spousal consent provisions included in the version of the legislation introduced last year specify that if a plan doesn't include certain types of annuities or lifetime payment options, an account owner could still take a distribution without written spousal consent if half of the amount goes into a retirement account owned by the spouse.

According to GovTrack, a site that monitors and assesses the likelihood of bills progressing, the 401(k) spousal consent legislation stands just a 1% chance of getting out of committee and has no chance of being enacted.

Save money, boost income using these year-round tax strategies

Latest News

In an AI world, investors still look for the human touch
In an AI world, investors still look for the human touch

AI is no replacement for trusted financial advisors, but it can meaningfully enhance their capabilities as well as the systems they rely on.

This viral motivational speaker can also be your Prudential financial advisor
This viral motivational speaker can also be your Prudential financial advisor

Prudential's Jordan Toma is no "Finfluencer," but he is a registered financial advisor with four million social media followers and a message of overcoming personal struggles that's reached kids in 150 school across the US.

Fintech bytes: GReminders and Advisor CRM announce AI-related updates
Fintech bytes: GReminders and Advisor CRM announce AI-related updates

GReminders is deepening its integration partnership with a national wealth firm, while Advisor CRM touts a free new meeting tool for RIAs.

SEC charges barred ex-Merrill broker behind Bain Capital private equity fraud
SEC charges barred ex-Merrill broker behind Bain Capital private equity fraud

The Texas-based former advisor reportedly bilked clients out of millions of dollars, keeping them in the dark with doctored statements and a fake email domain.

Trump's tax bill passes senate in hard-fought victory for Republicans
Trump's tax bill passes senate in hard-fought victory for Republicans

The $3.3 trillion tax and spending cut package narrowly got through the upper house, with JD Vance casting the deciding vote to overrule three GOP holdouts.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.