Congress is weighing a plan that could let workers move money from their 401(k) plans into personal annuities without leaving their jobs, in a shift that could reshape how Americans save for retirement.
The proposal, which was reintroduced in the House this week and has now been referred to a Congressional committee, would amend the Internal Revenue Code of 1986 to provide for “in-service rollovers,” giving employees more flexibility to lock in guaranteed income through annuities while still employed.
The Internal Revenue Service (IRS) told Newsweek it does not comment on pending legislation.
Why It Matters
A bipartisan push from Democratic Representative Jimmy Panetta of California and Republican Representative Darin LaHood of Illinois, which was referred to the House Committee on Ways and Means on Friday, aims to address growing concerns over market uncertainty and longevity risk by allowing workers to secure lifetime income.
If enacted, this initiative would represent one of the most substantial overhauls to the retirement savings system since the SECURE 2.0 Act was signed into law by Joe Biden.
What To Know
Congress is examining a proposal that would provide employees unprecedented flexibility to move funds from their 401(k) retirement accounts into annuities without leaving their current jobs, a process known as “in-service rollovers.”
It comes as part of a wider plan, the Retirement Simplification and Clarity Act, reintroduced this week by Representatives Panetta and LaHood, who described it as “bipartisan legislation that would provide more flexibility and clearer guidance to Americans navigating retirement savings decisions.”
The Congressmen said in a statement: “The bill would empower individuals with options and digestible information for securing their financial futures.”
They added: “Specifically, the Retirement Simplification and Clarity Act would implement key recommendations from the Government Accountability Office to streamline the complicated 402(f) notice process.
A 402(f) notice is the document provided to individuals who leave an employer and request a distribution from their 401(k) plans. The notice outlines distribution options and their tax implications.
Their bill directs the IRS to redesign this notice using clear, straightforward language, including plain explanations of all available distribution options—such as rolling savings into a new plan or keeping them in the current one—so individuals can make informed decisions about their retirement funds.
In addition, the legislation expands in-service rollover options by allowing individuals aged 50 and older to transfer funds from their employer-sponsored 401(k) accounts into an annuity.
Financial planning experts at the American Council of Life Insurers and the National Association of Insurance and Financial Advisors (NAIFA) are backing the plan.
Their new proposal builds on the foundation set by the SECURE Act 2.0, which Congress passed at the end of 2022 to expand options for retirement savers and raise the age at which Americans must begin taking Required Minimum Distributions (RMDs)—from 72 up to 73 in 2023 and then to 75 by 2033.
What People Are Saying
Democratic Representative Jimmy Panetta of California said: “Navigating the various methods of saving for retirement can get very complicated, very fast.
“This bipartisan bill helps Americans plan for retirement by making the process simpler and giving them more flexibility. By helping Americans make informed decisions about their savings, we can strengthen their financial security for retirement and the years ahead.”
Republican Representative Darin LaHood of Illinois said: “Hardworking Americans planning for retirement shouldn’t have to face extraneous complications that create uncertainty about their financial future.
“Providing more flexibility and a better guidance during the process will help ensure Americans can properly prepare for retirement and feel confident in their decisions. I am proud to lead this bipartisan effort with Representative Panetta to help eliminate needless hurdles and reduce the confusion surrounding retirement.”
David Chavern, president and CEO of the American Council of Life Insurers, said: “The Retirement Simplification and Clarity Act will help ensure Americans have the information and ability to make the best decisions for their retirement. As the only product that guarantees income for life, annuities play a unique and critical role in retirement planning. This important legislation will give Americans nearing retirement better information and additional options to achieve the retirement they want.”
NAIFA CEO Kevin M. Mayeux said: “As the largest national association of insurance and financial advisers with members assisting hard-working, everyday Americans in all states and congressional districts with retirement savings choices, we applaud any effort to simplify the rules for retirement savings and to enhance the ability of retirees to ensure they do not outlive their savings through guaranteed income options. This bill will advance those worthy goals, and NAIFA looks forward to working with the sponsors to see it enacted.”
Speaking about the challenges of retirement savings more widely, Edward Gottfried, of Betterment at Work, told BankRate.com: “Perhaps the biggest hurdle employers face in helping their employees invest for retirement is simply getting people enrolled in retirement plans.”
He added: “Auto-enrollment and auto-escalation don’t just increase retirement savings but also contribute to better financial outcomes for employees: Employees who start out auto-enrolled more frequently contribute more than the amount they were auto-enrolled at then decrease that amount.”
What Happens Next
Panetta and LaHood’s House proposal to provide for in-service rollovers to annuities is at the committee review stage.
It is due to face scrutiny at the Committee on Ways and Means, which is the chief tax-writing committee in the House of Representatives and the oldest Congressional committee.
Lawmakers are expected to hold hearings over the coming months to evaluate the potential impacts on retirement readiness and consumer protection.
The outcome of the current proposal could influence how millions prepare for and ultimately spend their retirement years, with substantial consequences for both tax policy and individual financial security.
Update 11/30/25 7:45 a.m. ET. This article was updated with quotes from the American Council of Life Insurers and the NAIFA.