Proposed 401(k) Rule Could Be a Game-Changer for Retirement Income – Here’s Why
A bill currently sitting in Congress aims to make it easier for 401(k) account holders to move money into annuities while also bringing more transparency regarding distribution options and tax implications.
The bipartisan bill, called the Retirement Simplification and Clarity Act (H.R. 6324), could be a game-changer in terms of retirement income options. But it holds potential risks, as well.
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Here’s a look at where the bill stands and how it could impact retirement savings and income.
Current Status
H.R. 6324 is an updated version of a previous bill that was reintroduced to the U.S. House in November 2025. Cosponsors included U.S. Rep. Jimmy Panetta (D-CA) and U.S. Rep. Darin LaHood (R-IL).
The bill was immediately referred to the House Ways and Means Committee, where it remains. Little information is available on when, or even if, it will advance to the next stage of the legislative process.
The Congress.gov website only lists two actions regarding the bill – its introduction and its referral to the committee, at the time of writing.
Key Provisions
The most important provision in H.R. 6324 is that it would allow employees ages 50 and older to roll over part or all of their 401(k) assets into a qualified annuity while still working, CNBC reported earlier this year. That represents a big change from the current rules.
“Right now, most people can’t move money [from their 401(k)] into an annuity while they are still enrolled,” David Chavern, president and CEO of the American Council of Life Insurers, told CNBC. “This significantly limits their options as they start to turn their accumulated savings into needed income.”
An annuity is an insurance product that pays out a fixed amount of money in a series of payments. The idea is to provide guaranteed income in retirement – something other retirement plans can’t provide. For example, a 401(k) or IRA account only lasts as long as you have money in it. With certain types of annuities, payments continue for as long as you live.
The second key provision in H.R. 6324 is that it requires the IRS to “update the official document that’s provided to individuals when they leave an employer and request a distribution from their 401(k) plan,” CNBC noted.
Both provisions have widespread support in the insurance industry.
“The new notice would use ‘clear, straightforward language’ to explain various options for 401(k) distributions and rollovers along with their tax implications,” the National Association of Insurance and Financial Advisors wrote in a statement of support in December 2025.
Potential Trouble Areas
One of the main sources of worry regarding the bill is that it could make some retirees overly dependent on the “solvency of a single insurance carrier,” said Chad Cummings, an attorney and certified public accountant (CPA) at Cummings & Cummings Law.
“I remind my clients that an annuity is not FDIC-insured. It is a contract with a private insurance company,” Cummings told MoneyLion. “State guaranty association coverage caps at $250,000 in most states, and some cap at $100,000. If your carrier fails and your annuity exceeds that cap, you absorb the loss. Therefore, we can't really use the word ‘guarantee’ in the literal sense, at least not without an asterisk. That's the key point.”
In addition, he said, rolling 401(k) funds into an annuity at age 50 “surrenders decades of equity market compounding.” This could add up to “hundreds of thousands” of dollars for upper-middle-class individuals.
“For example, a 50-year-old who moves $300,000 into a fixed annuity yielding 4% forfeits the historical 7%-to-10% annual return of a diversified equity portfolio,” Cummings said. “I tell clients: The annuity company is not offering you a gift or doing you a favor. It is buying your longevity risk at a steep discount and investing your money in the same markets you just exited.”
Editor’s note on political coverage: MoneyLion is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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