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DOL issues FAQs on lifetime income disclosure requirement

Benefits Administration and Outsourcing Solutions|Executive Compensation|Health and Benefits|Retirement|Total Rewards
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By Gary Chase and William (Bill) Kalten | August 25, 2021

The FAQs cover timing of the first statement that includes the lifetime income illustrations and whether transition relief will be provided.

The Department of Labor (DOL) recently issued Temporary Implementing FAQs on the interim final regulations (IFR) that will require plan administrators of ERISA-covered defined contribution plans to include lifetime income illustrations (LII) on participant benefit statements at least once annually.1 The IFR take effect on September 18, 2021, and implement provisions of the Setting Every Community Up for Retirement Enhancement Act.

The FAQs cover the applicability date of the IFR (i.e., when the first statement that includes the LII must be sent) and whether the DOL will provide transition relief to comply with any changes to the IFR when the final rule is issued.

Specifically, the FAQs provide that:

  • The first LII for a participant-directed account must be included in the benefit statement for a quarter that ends prior to September 18, 2022. In other words, the initial LII may be provided as late as the statement for the second calendar quarter of 2022 (ending June 30, 2022).
  • The first LII for a nonparticipant-directed account must be included in the benefit statement for the first plan year that ends on or after September 18, 2021. For a calendar-year plan, this means the initial LII must be included in the statement for calendar year 2021, which must be furnished no later than the last date for timely filing the annual return for the 2021 plan year (October 15, 2022).
  • A LII based on a participant's account balance projected to normal retirement age would not satisfy the LII requirement but could be issued as an additional LII.
  • The DOL intends to issue a final rule “as soon as practicable” (but did not commit to doing so before the September 18 effective date of the IFR). The DOL also acknowledged concerns about the need for sufficient transition time if the final rule differs materially from the IFR (but stopped short of stating that transition relief would be provided).

Going forward

Plan administrators may wish to begin determining how to comply with the LII requirements in the event transition relief is not provided and assuming the final rule does not differ significantly from the IFR.

Footnote

1See “DOL issues interim final rule on lifetime income illustrations,” Insider, October 2020.

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Director, Retirement and Executive Compensation

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