The Retirement Simplification and Clarity Act, or H.R. 6324, aims to make retirement planning easier for older Americans. It allows people aged 50 and over to roll over their 401(k) funds into an annuity for guaranteed lifetime income, and it simplifies the confusing paperwork involved in retirement distributions.
What This Bill Does
The Retirement Simplification and Clarity Act introduces two main changes to the current retirement system. First, it allows workers aged 50 and older to transfer some or all of their 401(k) funds into an individual retirement annuity. This means they can secure a steady income for life without having to leave their retirement plan. Currently, people can't use their 401(k) funds to buy annuities while still contributing to their plan, which this bill changes.
Second, the bill requires the IRS to simplify the notices given to people when they leave a job and want to take their retirement savings with them. These notices, known as 402(f) notices, are often filled with complex legal language that many people find hard to understand. The bill directs the IRS to rewrite these notices in plain language, making it easier for people to understand their options and the tax consequences of each choice.
These changes aim to make retirement planning less confusing and more secure for older workers. By allowing in-service rollovers to annuities and simplifying the paperwork, the bill hopes to help people make better decisions about their retirement savings.
Why It Matters
For many Americans, planning for retirement can be a daunting task, especially with the complex rules surrounding 401(k) plans. This bill is particularly important for people aged 50 and over who are planning for retirement. By allowing them to roll over their savings into an annuity, they can ensure a steady income stream for life, which can be a huge relief for those worried about outliving their savings.
The bill also benefits anyone who changes jobs and needs to decide what to do with their retirement savings. The simplified notices will help people understand their options better, reducing the risk of costly mistakes like taking a lump sum and facing a big tax bill. This can make a significant difference in the financial security of everyday Americans as they approach retirement.
Key Facts
- Cost/Budget Impact: There is no Congressional Budget Office (CBO) score available, but the bill is expected to have a negligible fiscal impact.
- Timeline for Implementation: The bill was introduced on November 28, 2025, but does not specify exact dates for when its provisions would take effect.
- Number of People Affected: Primarily affects 401(k) participants aged 50 and over, especially those changing jobs or nearing retirement.
- Key Dates: Introduced in late 2025, with no further action taken yet in Congress.
- Precedents: The bill follows recommendations from a 2024 Government Accountability Office (GAO) report highlighting the need for simpler retirement notices.
- Bipartisan Support: The bill has eight cosponsors from both parties, reflecting its broad appeal.
- Focus on Annuities: The bill uniquely targets annuities as a rollover option, which is not common in other retirement legislation.
Arguments in Support
- Flexibility for Older Workers: Supports argue that the bill gives older workers the flexibility to secure lifetime income without having to leave their retirement plan.
- Simplification of Complex Notices: The bill addresses the complexity of 402(f) notices, helping people make more informed decisions about their retirement savings.
- Improved Financial Security: By simplifying retirement planning, the bill aims to strengthen financial security for Americans nearing retirement.
- Employer Support: Research indicates that employers recognize the need for better income conversion options for their employees, which this bill provides.
- Bipartisan Support: The bill has backing from both sides of the political aisle, indicating broad support for its provisions.
Arguments in Opposition
- No Documented Opposition: As of now, there are no explicit arguments or concerns against the bill. This might be due to its recent introduction and narrow focus, which hasn't sparked much public debate yet.