24 Aug 2021
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.
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.
Practical Guidance Updates
Featuring the latest updates from your Practical Guidance account.
- Employee Benefits & Executive Compensation Key Legal Developments Tracker
Stay informed on new developments.- Retirement Plans
IRS announces that a sponsor adopting a plan during its 2021 tax year that has retroactive effect to its 2020 tax year, as permitted under SECURE Act § 201, does not need to file its first Form 5500 until the deadline for the plan year that begins in the 2021 tax year. IRS, Employee Plan News (Aug. 6, 2021).
- Retirement Plans
- Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts.
- New Practical Guidance Content
- Recently Updated Practical Guidance Content
Experience results today with practical guidance, legal research, and data-driven insights—all in one place.
Experience Lexis+