DOL Releases Interim Final Rule on Lifetime Income Disclosures to Participants

The Department of Labor (DOL) has released an interim final rule that requires retirement plans illustrate lifetime income projections for plan participants. Released through the DOL’s Employee Benefits Security Administration (EBSA), the rule is part of the SECURE Act (Setting Every Community Up for Retirement Enhancement) Act of 2019. The interim final rule provides the specifics surrounding what needs to be disclosed to participants, how often, the assumptions to be used in the calculation of the lifetime income projection, model language that plan sponsors can use, and more. The goal of the regulations is to help workers better understand how their current savings habits may or may not be preparing them for a sufficient income in retirement, by illustrating the estimated monthly income they can expect to draw from their account balance(s) at age 67.

The monthly income projections must be provided at least once annually, though plan sponsors may want to consider adding this information to quarterly statements. While the DOL rule does not require a retirement plan to offer annuities or participants to use annuities, the rule requires that the monthly income projection be displayed as both a single life income stream and a stream including survivor benefits (Qualified Joint & Survivor Annuity). Additionally, the projection must also provide explanations about the assumptions used to calculate them, and very clearly state that the projections provided are not guaranteed.

Anticipating the potential for administrative burdens in complying, the rule includes model language that plan sponsors and administrators can use. If plan administrators decide to use the proscribed assumptions and model language, they will qualify for relief from liability if the participant’s balance does not provide for the projected monthly income amounts.

The DOL has provided a fact sheet that includes the assumptions for spousal and survivor benefits, the assumed interest rate, assumed mortality rate, and an example illustration of a participant’s projection of monthly income.

After the rule is published to the federal register (expected to take place soon), there will be a 60-day comment period. Following the comment period, the rule will become final one year from publication.

Jeanne Klinefelter Wilson, the Acting Assistant Secretary of Labor for the EBSA, said in a DOL statement, “Our goal is to help workers and retirees understand how savings translate to retirement income. Defined contribution [DC] plan savings are meant to stretch across the years of retirement. When workers are reminded of what their balances could mean in terms of an estimated monthly dollar amount, they can use this information to plan both savings and spending.”

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