401(k) Spousal Consent Bills Quietly Reintroduced in House and Senate

House and Senate Democrats quietly reintroduced bills on July 27 to require spousal consent for 401(k) distributions.

H.R.5060 and S.2627 would “amend the Employee Retirement Income Security Act of 1974 to provide for greater spousal protection under defined contribution plans, and for other purposes,” according to the bill's long title.

Supporters argue that since defined contribution retirement plans are often a couple’s largest financial asset aside from their home, spousal consent is needed to prevent the “devastating effect” if one spouse takes a withdrawal from their account without the other spouse’s knowledge or consent, especially for those less familiar with the household’s finances.

Opponents note the potential issues that could arise from such a requirement, including the negative impact on victims of domestic violence and other forms of abuse.

Rep. Lauren Underwood (D-Ill., 14th) and Senator Tammy Baldwin, D-Wis., of the Committee on Health, Education, Labor, and Pensions (HELP), reintroduced the bill.

“This legislation creates a new spousal consent requirement for nearly all distributions from individual account retirement plans, like 401(k) plans,” Andrew Remo, Director of Federal and State Legislative Affairs for the American Retirement Association (ARA), said. “While we support the policy goal behind this proposal, which is to protect the retirement security of a spouse, more research needs to be done on this approach to determine whether it would do greater harm than good.”

In March 2022, members of the Senate HELP Committee asked the Government Accountability Office (GAO) to investigate 401(k) spousal consent, claiming that “Unlike traditional defined benefit retirement plans and the federal government’s Thrift Savings Plan that have spousal protections, private employer-sponsored defined contribution retirement plans—which have become the most common retirement savings vehicle—currently provide no similar safeguards.”

To better understand the issue, they asked the GAO to answer the following questions:

• How often are withdrawals made from DC plans involving married couples?
• In what circumstances is a married participant able to withdraw money from a DC plan without spousal consent, and what is known about the effect on their spouse?
• What are the perspectives of plan participants and spouses on distributions where spousal consent is not required?
• How could the spousal protections for DB plans and the TSP be applied to the DC plan regime?
• How could the administrative burdens on plan sponsors and recordkeepers in connection with DC spousal protections be eased?
• What impact would remote witnessing of written consent agreements to withdrawals or change of beneficiary have on the consent of the spouse?
• Under what circumstances would obtaining spousal consent prior to a DC plan withdrawal or change of beneficiary be inappropriate?