You’ve probably recently heard the passing of a new law with a wide range of retirement plan changes for employers and individuals. One of the provisions of the SECURE Retirement Act involves a new requirement for employers. This includes a defined sponsor tax-favored contribution retirement plan that’s subject to the ERISA compliance.
{ERISA: Employee Retirement Income Security Act}

Specifically, the law will require that the benefit statements sent to plan participants include a lifetime income disclosure at least once during any 12-month period. The disclosure will need to illustrate the monthly payments that an employee would receive if the total account balance were used to provide lifetime income streams. This includes a single life annuity and a qualifying joint and survivor annuity for the participant and the participant’s surviving spouse.

Background Information

Under ERISA compliance, a defined contribution plan administrator is required to provide benefit statements to participants. Depending on the situation, these statements must be provided quarterly, annually or upon written request. In 2013, the U.S. Department of Labor (DOL) issued an advance notice of proposed rule-making providing rules that would have required benefit statements provided to defined contribution plan participants to include an estimated lifetime income stream of payments based on the participant’s account balance.

Although the requirement is not yet official, some employers began providing this information in these statements.

But in the near future, employers will have to begin providing information to their employees about lifetime income streams.

Effective Date

Fortunately, there has been a delay for the effective date of the requirement until after the DOL issues guidance. It won’t go into effect until 12 months after the DOL issues a final rule. The law also directs the DOL to develop a model disclosure.

Plan fiduciaries, plan sponsors, or others won’t have liability under ERISA compliance. This is solely because they provided the lifetime income stream equivalents. So long as the equivalents are derived in accordance with the assumptions and guidance and that they include the explanations contained in the model disclosure.

Stay Tuned

Critics of the new ERISA compliance & rules argue the required disclosures will lead to confusion among participants. Critics also question how employers will arrive at the income projections. For now, employers have to wait for the DOL to act. We’ll update you when that happens. Contact us if you have questions about this requirement or other provisions in the SECURE Act.