What? Me Save? New Lifetime Income Benefit Statement Disclosure May Spurn Increased Employee Savings

Plan administrators of ERISA-covered defined contribution plans must soon update their participant benefit statements to display each participant’s account balance so it projects the balance as a single life annuity and a qualified joint and survivor annuity beginning at age 67. In this way participants can see what their vested (assuming 100% vesting) plan account balances will provide as an income stream in retirement. The SECURE Act, signed into law in December 2019 (Pub. L. No. 116-94, Div. O), is responsible for this disclosure, and requires that it be provided at least annually. Recent DOL FAQ guidance indicates that defined contribution plans must incorporate their first lifetime illustration by June 30, 2022, or later for plans not permitting participant-directed investment. The hope is that the disclosure will raise participant awareness of their retirement savings readiness (or unreadiness). See 85 Fed. Reg. 59132 (Sept. 18, 2020) for the interim final rule.

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Related Content

• Lifetime Income Benefit Rules for Defined Contribution Plans Under the SECURE Act
  Learn how the SECURE Act sets forth three requirements concerning lifetime income benefits for defined contribution plans: (1) providing a fiduciary safe harbor for selecting insurance companies to provide annuitized benefit contracts, (2) facilitating portability of lifetime income investment options, and (3) requiring disclosure of what a participant’s estimated monthly retirement benefit under a plan would be if his or her current plan benefit were converted to a lifetime income stream. This last requirement is satisfied by including the lifetime income information in the ERISA 105(a) required benefit statement disclosure, at least annually.

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