INFORM Act
Bill: S.4087 | Sponsor: Sen. Murray, Patty (D-WA)
Policy area: Labor and Employment

Summary:
Information Needed for Financial Options Risk Mitigation or the INFORM Act
This bill requires pension plan sponsors to provide certain information to participants and beneficiaries when the sponsor makes an offer to pay the plan's lifetime annuity as a lump sum. This includes the relative value of the lump sum option compared to the single life annuity and the qualified joint and survivor annuity, as well as the general tax rules for accepting such lump sum.

To require pension plans that offer participants and beneficiaries the 
option of receiving lifetime annuity payments as lump sum payments, to 
            meet certain notice and disclosure requirements.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Information Needed for Financial 
Options Risk Mitigation Act'' or the ``INFORM Act''.

SEC. 2. NOTICE AND DISCLOSURE REQUIREMENTS WITH RESPECT TO LUMP SUM 
              WINDOWS.

    (a) In General.--Part 1 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1021 et seq.) is 
amended by adding at the end the following:

``SEC. 112. NOTICE AND DISCLOSURE REQUIREMENTS WITH RESPECT TO LUMP SUM 
              WINDOWS.

    ``(a) In General.--A plan sponsor of a pension plan that amends the 
plan to provide a period of time during which a participant or 
beneficiary may elect to receive a lump sum under clause (i) of section 
401(a)(9)(A)(i) of the Internal Revenue Code of 1986, instead of future 
monthly payments under clause (ii) of such section, shall provide 
notice--
            ``(1) to each participant or beneficiary offered such lump 
        sum amount, in the manner in which the participant and 
        beneficiary receives the lump sum offer from the plan sponsor, 
        not later than 90 days prior to the first day on which the 
        participant or beneficiary may make an election with respect to 
        such lump sum; and
            ``(2) to the Secretary and the Pension Benefit Guaranty 
        Corporation, not later than 30 days prior to the first day on 
        which participants and beneficiaries may make an election with 
        respect to such lump sum.
    ``(b) Notice to Participants and Beneficiaries.--
            ``(1) Content.--The notice required under subsection (a)(1) 
        shall include the following:
                    ``(A) Available benefit options, including the 
                estimated monthly benefit that the participant or 
                beneficiary would receive at normal retirement age, 
                whether there is a subsidized early retirement option 
                or qualified joint and survivor annuity that is fully 
                subsidized (in accordance with section 417(a)(5) of the 
                Internal Revenue Code of 1986), the monthly benefit 
                amount if payments begin immediately, and the lump sum 
                amount available if the participant or beneficiary 
                takes the option.
                    ``(B) An explanation of how the lump sum was 
                calculated, including the interest rate, mortality 
                assumptions, and whether any additional plan benefits 
                were included in the lump sum, such as early retirement 
                subsidies.
                    ``(C) In a manner consistent with the manner in 
                which a written explanation is required to be given 
                under 417(a)(3) of the Internal Revenue Code of 1986, 
                the relative value of the lump sum option for a 
                terminated vested participant compared to the value 
                of--
                            ``(i) the single life annuity, (or other 
                        standard form of benefit); and
                            ``(ii) the qualified joint and survivor 
                        annuity (as defined in section 205(d)(1));
                    ``(D) Whether it would be possible to replicate the 
                plan's stream of payments by purchasing a comparable 
                retail annuity using the lump sum.
                    ``(E) The potential ramifications of accepting the 
                lump sum, including longevity risks, loss of 
                protections guaranteed by the Pension Benefit Guaranty 
                Corporation (with an explanation of the monthly benefit 
                amount that would be protected by the Pension Benefit 
                Guaranty Corporation if the plan is terminated with 
                insufficient assets to pay benefits), loss of 
                protection from creditors, loss of spousal protections, 
                and other protections under this Act that would be 
                lost.
                    ``(F) General tax rules related to accepting a lump 
                sum, including rollover options and early distribution 
                penalties with a disclaimer that the plan does not 
                provide tax, legal, or accounting advice, and a 
                suggestion that participants and beneficiaries consult 
                with their own tax, legal, and accounting advisors 
                before determining whether to accept the offer.
                    ``(G) How to accept or reject the offer, the 
                deadline for response, and whether a spouse is required 
                to consent to the election.
                    ``(H) Contact information for the point of contact 
                at the plan sponsor for participants and beneficiaries 
                to get more information or ask questions about the 
                options.
            ``(2) Plain language.--The notice under this subsection 
        shall be written in a manner calculated to be understood by the 
        average plan participant.
            ``(3) Model notice.--The Secretary shall issue a model 
        notice for purposes of the notice under subsection (a)(1), 
        including for information required under subparagraphs (C) 
        through (F) of paragraph (2).
    ``(c) Notice to the Secretary and Pension Benefit Guaranty 
Corporation.--The notice required under subsection (a)(2) shall include 
the following:
            ``(1) The total number of participants and beneficiaries 
        eligible for such lump sum option.
            ``(2) The length of the limited period during which the 
        lump sum is offered.
            ``(3) An explanation of how the lump sum was calculated, 
        including the interest rate, mortality assumptions, and whether 
        any additional plan benefits were included in the lump sum, 
        such as early retirement subsidies.
            ``(4) A sample of the notice provided to participants and 
        beneficiaries under subsection (b).
    ``(d) Post-Offer Report to the Secretary and Pension Benefit 
Guaranty Corporation.--Not later than 90 days after the conclusion of 
the limited period during which participants and beneficiaries in a 
plan may accept a plan's offer to convert their annuity into a lump sum 
as generally permitted under section 401(a)(9) of the Internal Revenue 
Code of 1986, a plan sponsor shall submit a report to the Secretary and 
the Director of the Pension Benefit Guaranty Corporation that includes 
the number of participants and beneficiaries who accepted the lump sum 
offer and such other information as the Secretary may require.
    ``(e) Public Availability.--The Secretary shall make the 
information provided in the notice to the Secretary required under 
subsection (a)(2) and in the post-offer reports submitted under 
subsection (d)(1) publicly available in a form that protects the 
confidentiality of the information provided.
    ``(f) Guidance and Regulations.--The Secretary--
            ``(1) not later than 180 days after the date of enactment 
        of this section, shall issue guidance and model notices for 
        plan sponsors to use in providing the notice described in 
        subsection (b); and
            ``(2) may promulgate such other regulations as may be 
        necessary to carry out this section.
    ``(g) Biannual Report.--Not later than 6 months after the date of 
enactment of this section and every 6 months thereafter, so long as the 
Secretary has received notices and post-offer reports under subsections 
(c) and (d), the Secretary shall submit to Congress a report that 
summarizes such notices and post-offer reports during the applicable 
reporting period.''.
    (b) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 111 the following new item:

Sec. 112. Notice and disclosure requirements with respect to lump sum 
                            windows.
    (c) Enforcement.--Section 502 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132) is amended--
            (1) in subsection (c)(1), by striking ``or section 105(a)'' 
        and inserting ``, section 105(a), or section 112(a)''; and
            (2) in subsection (a)(4), by striking ``105(c)'' and 
        inserting ``section 105(c) or 112(a)''.
    (d) Effective Date.--The amendments made by subsections (a), (b), 
and (c) shall take effect on the date of enactment of this Act.
    (e) Regulatory Authority.--Not later than 1 year after the date of 
enactment of this Act, the Secretary of the Treasury and the Secretary 
of Labor shall jointly issue regulations to implement section 112 of 
the Employee Retirement Income Security Act of 1974, as added by 
subsection (a). Such regulations shall require plan sponsors to comply 
in good faith with the regulations beginning not later than 1 year 
after issuance of a final rule with respect to subsections (a)(1) and 
(b) of such section 112, and beginning not later than 6 months after 
issuance of a final rule with respect to subsections (a)(2), (c), (d), 
and (e) of such section 112.
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