DOL Publishes Guidance on Retirement Plan Benefit Statements:

On August 5, 2020, the DOL issued a regulation regarding information that must be provided on defined contribution plan participants’ benefit statements under section 105 of ERISA, as amended by the SECURE Act. The regulation requires plan administrators of those plans to express a participant’s current account balance as a single life annuity (a lifetime income stream payable in equal monthly payments for the life of the participant) and as a qualified joint and survivor annuity (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 provides for annuities/lifetime income distribution options. The DOL’s main intent is for these two income stream illustrations, which must be on the same statement, 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 also provides plan administrators with assumptions to use when preparing the lifetime income illustrations. These relate to the participant’s benefit commencement date, age, marital status, as well as interest rate and mortality assumptions. Also helpful is the regulation’s inclusion of model language that can be used for benefit statements. If that model language is used, or language that is “substantially similar in all material respects,” the plan administrator can obtain relief from liability regarding the illustrations.  

Note that this regulation will not become effective until one year after its publication in the Federal Register, and it will apply to benefit statements furnished after that date.