As you\u2019ve probably heard, a new law was recently passed with a wide range of retirement plan changes for employers and individuals. One of the provisions of the SECURE Act involves a new requirement for employers that sponsor tax-favored defined contribution retirement plans that are subject to ERISA.
\nSpecifically, 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, including a single life annuity and a qualified joint and survivor annuity for the participant and the participant\u2019s surviving spouse.
\nBackground information
\nUnder ERISA, 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 rulemaking 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\u2019s account balance.
\nSome employers began providing this information in these statements \u2014 even though it wasn\u2019t required.
\nBut in the near future, employers will have to begin providing information to their employees about lifetime income streams.
\nEffective date
\nFortunately, the effective date of the requirement has been delayed until after the DOL issues guidance. It won\u2019t go into effect until 12 months after the DOL issues a final rule. The law also directs the DOL to develop a model disclosure.
\nPlan fiduciaries, plan sponsors, or others won\u2019t have liability under ERISA 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.
\nStay tuned
\nCritics of the new rules argue the required disclosures will lead to confusion among participants and they question how employers will arrive at the income projections. For now, employers have to wait for the DOL to act. We\u2019ll update you when that happens. Contact us if you have questions about this requirement or other provisions in the SECURE Act.
\n\u00a9 2019<\/p>\n","protected":false},"excerpt":{"rendered":"
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