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.
A $141M judgment and a federal asset freeze collide over one shrinking pool
The firm's CFO and EVP of Wealth Management Solutions are the latest executives to exit the broker-dealer.
Clients are saying they would consider switching advisors if another professional offered estate planning services, according to a new Trust & Will survey.
CEO Laurel Taylor says the fintech's composable AI stack helps workers optimize dollars across Trump Accounts, 529s, 401(k)s, and other employee benefits.
The bank has swiped three private banking veterans from BNY as the city climbs the ranks of America's fastest-growing wealth hubs.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
