The Ball Is Now in Employers’ Court to Fix Retirement’s Language Issue

The U.S. Congress recently mobilized a bill that changes no benefit formula, allocates no money and amends no plan rule. The Claiming Age Clarity Act, which passed the Senate on Sept. 29 and awaits President Donald Trump’s signature, changes terminology regarding Social Security:

• “Early eligibility age” becomes “minimum benefit age.”
• “Full retirement age” becomes “standard benefit age.”
• “Delayed retirement credits” becomes “maximum benefit age.”

While the changes may seem small, this may be one of the more consequential retirement bills in years. It also points to something every HR/Rewards leader should examine in their benefits communications.

The Importance of How a Question Is Asked

In a well-known experiment, two groups were shown an economically equivalent life annuity. Described as monthly income available for spending, the majority chose it over leaving the money in a savings account.

That finding should unsettle anyone who has spent the past decade asking whether employees want guaranteed retirement income. It suggests the answer depends heavily on how the question is phrased.

Congress has now acknowledged as much regarding Social Security election terminology. “Full” sounded like completion, as though an employee reaching 67 had arrived at the right answer, even though benefits continue to grow until 70. “Early” sounded like a scheduling choice rather than a permanent reduction. “Delayed” sounded like procrastination rather than the largest available benefit. Roughly 23% of new Social Security claims in 2023 were filed at age 62.

The Half Congress Didn’t Fix

Unfortunately, the legislation addresses only the government’s vocabulary. The retirement industry’s vocabulary is still a significant issue.

Count the terms in circulation: retirement income, lifetime income, guaranteed lifetime income, guaranteed income, protected income and systematic withdrawal. They describe materially different things. Statutes use the term “lifetime income.” Provider marketing uses “protected income.” Consultant decks use “retirement income solutions.” A benefits committee meeting can include four words and three meanings, and no one stops to reconcile them.

The costs fall to employers. A plan sponsor can’t meaningfully compare two solutions when two providers use the same word for different structures, which presents due diligence issues. And, an employee who encounters inconsistent language across a statement, a portal and a pre-retirement seminar may reasonably conclude the subject is too complicated to understand and disengage before evaluating anything.

Why ‘Guaranteed’ Isn’t a Marketing Word

One term carries real exposure. “Guaranteed” is a contractual obligation by an identified guarantor for a stated amount under stated terms. Applying it to a managed payout — an arrangement that pays until the balance runs out — does not simplify the message. It creates compliance, communication and fiduciary risk for the employer whose name appears on the material.

The bottom line? Appropriate language is critical to a successful conversation and actions.

What HR/Rewards Leaders Can Do Now

Ratchet up your retirement-related communications with the following actions:

1. Define the terms in your retirement service providers’ evaluation documentation. Employers should require every provider to state clearly what specific retirement income structure it is offering: insured lifetime income, a systematic withdrawal, a managed payout or something else. If a solution is described as guaranteed, the file should identify the guarantor and the amount.
2. Lead with retirement income, not retirement account balance. A participant statement that opens with a projected monthly amount, the payment period and whether it is guaranteed gives an employee something to plan around. An account value does not.
3. Make the choice a dial, not a switch. When individuals are presented the option of securing guaranteed income in increments rather than facing a single all-or-nothing decision, utilization rises significantly.
4. Change the labels last. Terminology matters less than the frame, the unit of measurement or the choice structure. A new word within an unchanged structure changes little.

Congress concluded that the words used to describe a retirement decision help shape that decision and acted on that conclusion. Employers have the same evidence, far more control over their own materials and no need for legislation.

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