Retirement Simplicity and Clarity Act: Annuities and In-Service Rollovers

A Potential Turning Point for Retirement Income Planning

The Retirement Simplicity and Clarity Act is quietly making its way through committee, but its implications are anything but small. If enacted, the legislation would expand in-service rollovers to include annuities, giving active employees the ability to move a portion of their defined contribution assets into individual retirement annuities without leaving their employer.

Today, in-service rollovers already allow workers to shift assets from plans such as 401(k)s into IRAs. The proposed change would extend that flexibility to annuities, opening a new pathway to guaranteed income while employees are still accumulating assets. For insurers, asset managers, and plan sponsors, this could subtly reshape how retirement income solutions are positioned and delivered.

“This proposal recognizes that guaranteed income planning does not have to wait until the day someone retires.”
Industry retirement policy executive

What the Legislation Would and Would Not Do

The bill is targeted rather than sweeping. It applies to participants age 50 and older and limits eligible products to individual retirement annuities under section 408(b) of the Internal Revenue Code. Importantly, it does not replace existing in-plan income strategies. Instead, it adds another option alongside them.

From a market perspective, that distinction matters. The proposal creates optionality without mandating plan redesigns or displacing existing qualified default investment alternatives. For plan sponsors that have been hesitant to add in-plan annuities, in-service rollovers could feel like a lower-friction alternative. For carriers and asset managers, it introduces a parallel distribution channel tied directly to workplace plans.

Why In-Plan Income Still Matters

Despite the attention around rollovers, participant behavior continues to favor in-plan solutions. Many workers prefer to build guaranteed income gradually through payroll deductions rather than making a single, irreversible allocation later in life. Automatic enrollment and ongoing contributions reinforce that preference, steadily growing income-focused balances over time.

There is also a governance dimension. Plan sponsors often prefer to keep assets inside the plan environment where fees, fiduciary oversight, and participant outcomes can be monitored more closely. That preference aligns with broader industry trends toward holistic retirement income design rather than fragmented, out-of-plan solutions.

“Participants consistently tell us they want simplicity and predictability, not a one-time decision they have to get exactly right.”
Defined contribution plan consultant

Adoption Remains the Core Challenge

The reality, however, is that in-plan income adoption remains limited. Roughly one in ten plan sponsors currently offers an in-plan income solution. Education requirements, product selection responsibilities, and perceived fiduciary risk continue to slow uptake.

In-service rollovers could bypass some of those barriers. Allowing annuity allocations without deep sponsor involvement reduces the need for extensive plan amendments or product vetting. That convenience may appeal to sponsors, but it also raises questions about whether it diverts momentum away from broader in-plan adoption.

The strategic response for insurers will hinge on balance. Rollovers may create incremental sales opportunities, but long-term growth still depends on embedding guaranteed income within the plan architecture.

Strategic Implications for the Insurance Industry

If the legislation advances, insurers and retirement solution providers will need to recalibrate quickly. Key considerations include:

• Product design that supports both in-plan accumulation and out-of-plan annuitization without creating participant confusion.

• Distribution strategies that engage participants earlier, well before retirement decision points.

• Operational readiness across underwriting, administration, and claims to support a potentially higher volume of smaller, staged annuity purchases.

A Snapshot of the Current Landscape

Looking Ahead

The Retirement Simplicity and Clarity Act is far from guaranteed passage. Legislative hurdles remain, and timing is uncertain. Still, the proposal underscores a broader truth the industry has been grappling with for years: retirees need more reliable income solutions, and flexibility alone is not enough.

For insurers, the opportunity lies in treating in-service rollovers not as competition to in-plan income, but as a complementary tool. Providers that can align both approaches into a coherent retirement income story will be best positioned if and when the rules change.

“Whether this bill passes or not, the direction of travel is clear. Guaranteed income is moving closer to the center of the defined contribution system.”
Insurance industry strategist