Department of Labor Publishes Guidance on Certain Retirement Plan Benefit Statements:

On July 26, 2021, the Department of Labor (“DOL”) issued a series of Frequently Asked Questions (“FAQs”) addressing lifetime income illustrations.

As background, in September of 2020 the DOL issued a regulation regarding information that will have to be included in defined contribution plan participants’ benefit statements. The regulation requires plan administrators to express a participant’s current account balance as a single life annuity (i.e., a lifetime income stream payable in equal monthly payments for the participant’s life) and as a qualified joint and survivor annuity (i.e., a lifetime income stream payable in equal monthly payments for the joint lives of the participant and his or her spouse). That rule applies whether or not the plan actually provides for annuities/lifetime income distribution options. The DOL’s main intent is for these two income stream illustrations to “help participants better understand how the amount of money they have saved so far converts into an estimated monthly payment for the rest of their lives, and how this impacts their retirement planning.”

The regulation, which becomes effective on September 18, 2021, also provides plan administrators with assumptions to use when preparing the lifetime income illustrations, as well as with model language that can be used for these benefit statements.

Under the FAQs:

  • Certain defined contribution plans must issue quarterly statements under ERISA must incorporate their first lifetime income illustrations on any quarterly statement up to the second calendar quarter of 2022 (ending June 30, 2022). This rule applies to plans that allow participants to decide how their account is invested.
  • For defined contribution plans that do not allow participants to decide how their account is invested, the first lifetime income illustrations must be on the benefit statement for the first plan year ending on or after September 19, 2021. For most of those plans, that will be the statement for calendar year 2021, which must be furnished no later than the last date for timely filing the 2021 Form 5500 series return.