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Compliance Corner

Retirement Updates

DOL Publishes Lifetime Income Illustrations Interim Final Rule

On September 18, 2020, the DOL published an interim final regulation regarding lifetime income illustrations for defined contributions plans, which include 401(k) plans. The income stream information must be provided at least annually on participant benefit statements.

As explained in our prior September 1, 2020, Compliance Corner article, this new requirement was a component of the SECURE Act. The annual income disclosure is designed to show the monthly retirement income that would be generated from a participant’s defined contribution plan account balance. The participant could then evaluate whether current contribution levels were adequate to reach desired retirement income goals.

Specifically, the disclosures must display the projected monthly amounts that the account balance would provide as a single life annuity for the life of the participant with no death benefit. The illustrations also must reflect the monthly amount in the form of a qualified joint and 100% survivor annuity that provides an equal benefit for a surviving spouse. The rule outlines the assumptions upon which these annuity benefits are to be based.

Additionally, the disclosures must include language that explains the annuity payment calculations and emphasizes that the projected amounts are illustrations and not guarantees. Appendix A and B to Subpart F of the regulation provide model language for this purpose. Appendix A is designed for plans that do not offer an annuity form of payment and Appendix B is intended for plans that currently provide an annuity option.

The rule is effective on September 18, 2021, and shall apply to benefit statements furnished after such date. Written comments are being accepted through November 17, 2020.

Employers should be aware of the publication and work with their service providers to ensure the rule’s requirements are implemented accurately.

Interim Final Rule »

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