In a new paper, Lifetime Income Illustrations: Preparing for Participant Reactions Opens in new window, we take a deeper dive into lifetime income illustrations, how they must be calculated, and share examples of how they might make retirement plan participants more aware of their income challenges and opportunities. The Assumption & Explanation links below provide details on how the monthly payment illustration (s) are calculated as if the payments begin on the last day of the statement period. We will communicate this change to plan sponsors in the coming months. An Interim Final Rule (IFR) published by the Department of Labor (DOL) took effect September 18, 2021. Department of the Treasury, published a Request for Information about lifetime income and related issues in 2010. The Lifetime Income Illustrations essentially assume that you plow all your 401(k) into Treasury bonds upon retirement. For plans on platforms such as Voya or the American Funds, the fund company is providing this illustration. Joint Income Lifetime Hearing Notice. Additional Lifetime Income Illustrations. proposed requiring lifetime income illustrations in pension benefit statements, and, along with the . 2 . You will need each employee's month and year of birth, plus the 12/31 prior year-end account balance. The SECURE Act, signed into law in 2019, requires sponsors of 401(k), and similar workplace retirement plans, to include two lifetime income illustrations at least once annually on participant statements.The interim rule, released last year, is set to take effect on September 18, 2021. Department of Labor (DOL) provided guidance. The first illustration is due on any quarterly statement up to June 30, 2022. On August 18, 2020, the U.S. Department of Labor (DOL) announced an interim final rule (IFR) to implement the SECURE Act's requirements for lifetime income disclosures. The Department of Labor has proposed . It's a low risk strategy, and a very low return strategy. Sponsors of participant-directed defined contribution (DC) plans must provide lifetime income illustrations to participants in their plans no later than with the second quarterly benefit statements of 2022 (i.e., the first illustration needs to be in place for the quarter that ends June 30, 2022). The Lifetime Income Illustrations essentially assume that you plow all your 401(k) into Treasury bonds upon retirement. Single Life Annuity: Joint & 100% Survivor Annuity: Generate Statement. In December of 2019, Congress passed the SECURE Act. Lifetime income illustrations (LII) are almost here. On August 18, 2020, DOL issued the IFR implementing the LII requirement. It's a low risk strategy, and a very low return strategy. Key takeaways. The FAQs clarify that plan administrators can provide additional illustrations to supplement (but not replace) those illustrations required by the SECURE Act . Under the SECURE Act, defined contribution plans are required to provide illustrations of lifetime monthly income based on the current account balances of plan participants. 401(k) Lifetime Income Illustrations By Anne Zavaglia Posted on September 3rd, 2021. Key takeaways. Posted March 17. When converting a participant's account balance into these new lifetime income monthly payment illustrations, there are six assumptions laid out in the IFR: Commencement Date & Age: Payments will begin on the last day of the statement period and will assume the participant is age 67 (or the participant's actual age if older). Lifetime income illustrations (LII) are almost here. Lifetime Income Illustrations. Sponsors of participant-directed defined contribution (DC) plans must provide lifetime income illustrations to participants in their plans no later than with the second quarterly benefit statements of 2022 (i.e., the first illustration needs to be in place for the quarter that ends June 30, 2022). The lifetime income illustrations disclosure requirement takes effect on September 18, 2021 (one year after the interim final rule's September 18, 2020 publication date). On July 26, 2021, the DOL released temporary implementing FAQs (FAQs), clarifying the upcoming deadlines for disclosure of lifetime income illustrations. For plans on platforms such as Voya or the American Funds, the fund company is providing this illustration. Lifetime income illustrations will be added to RecordkeeperDirect and PlanPremier quarterly participant statements, beginning with the June 30, 2022, statement. 1 • In December of 2019, Congress passed the SECURE Act. You can use it for yourself or provide estimates for all of your employees. The lifetime income illustration must be calculated on the basis of the participant's current account balance as of the last day of the applicable "statement period." For these purposes, the statement period is the calendar quarter benefit statement period that is being used for the lifetime income illustration. The DoL's justification is that this is supposed to mimic the pricing seen from insurers on annuity products. Under the SECURE Act, Lifetime Income Illustrations are required to be provided to participants in participant-directed plans. Monthly income will be expressed in two ways: as a single life annuity and a qualified joint and survivor annuity. As early as year-end 2021, many plan sponsors are required to provide LII to participants. Reg. Get prepared. Use the lifetime income illustration tool powered by Convergent to estimate retirement income based on age and savings to date. Section 203 of the SECURE Act amended New Lifetime Income Illustration Disclosures Now In Effect. the requirement that the illustrations be included on a statement within the first 12 months after the effective date of the IFR. Department of Labor (DOL) provided guidance. Lifetime Income Literature Review: Designing Better Pension Benefits Statements. The lifetime income illustrations disclosure requirement takes effect on September 18, 2021 (one year after the interim final rule's September 18, 2020 publication date). The Sept. 18, 2021, effective date for the Department of Labor's annual lifetime income illustrations rule is approaching. 2. For purposes of the QJSA, it must assume that a spouse is the same age as the participant or beneficiary. For each of the 76.8 million defined contribution plan participants with account balances whose statements will include a lifetime income illustration, the Department estimates that the IFR will increase the cost of producing and distributing statements by $2.6 per participant in the first year, . As early as year-end 2021, many plan sponsors are required to provide LII to participants. EBSA published an Advanced Notice of Proposed Rulemaking in 2013, which proposed requiring lifetime income illustrations in pension benefit statements, and, along with the Department of the Treasury, published a Request for Information about lifetime income and related issues in 2010. Q2 of the DOL guidance clarifies application of the effective date of the interim final rule to non-participant-directed plans under which a participant or beneficiary has his or her own account but does not have the right to direct the investment of assets . Proposed Information Collection Request - Survey Regarding Pension Benefit Statements. In short, the IFR - clarifies the scope of the LII requirements - all ERISA-covered defined contribution plans must provide two annual illustrations (one based on a single-life annuity and the other on a 100% The lifetime income illustration must be calculated on the basis of the participant's current account balance as of the last day of the applicable "statement period." For these purposes, the statement period is the calendar quarter benefit statement period that is being used for the lifetime income illustration. On July 26, 2021, the DOL released temporary implementing FAQs (FAQs), clarifying the upcoming deadlines for disclosure of lifetime income illustrations. The SECURE Act requires plan sponsors of ERISA-covered plans to disclose annually a projection of a lifetime income stream that could be generated by a . They must assume that a participant is age 67 on the assumed . The rule's implementation will be a paradigm shift from focusing . 1 • In December of 2019, Congress passed the SECURE Act. AB is a leading global investment management firm that is a major provider of defined contribution plan savings, investment and retirement income options some of which include variable annuity products. October 27, 2021. Hearing Transcript: September 14, 2010 | September 15, 2010. In December of 2019, Congress passed the SECURE Act. You will need each employee's month and year of birth, plus the 12/31 prior year-end account balance. Hall Benefits Law, LLC. • For non-participant directed individual account plans, lifetime income illustrations must be on the statement for the first plan year ending on or after September 19, 2021. The first illustration is due on any quarterly statement up to June 30, 2022. Plans that must furnish quarterly benefit statements (because participants may direct their plan investments) must first include lifetime income illustrations on benefit statements for a quarter ending within 12 months after the IFR's September 18, 2021 effective date.Accordingly, the illustrations may be included in any quarterly statement up to . 2. The Sept. 18, 2021, effective date for the Department of Labor's annual lifetime income illustrations rule is approaching. Section 203 of the SECURE Act amended "Although the SECURE Act requires plan administrators to provide participants with lifetime income illustrations that differ from the illustrations proposed in the department's 2013 ANPRM, the department's rule specifically allows for additional lifetime income illustrations," the agency's FAQs document says. In a new paper, Lifetime Income Illustrations: Preparing for Participant Reactions Opens in new window, we take a deeper dive into lifetime income illustrations, how they must be calculated, and share examples of how they might make retirement plan participants more aware of their income challenges and opportunities. You can use it for yourself or provide estimates for all of your employees. The rule's implementation will be a paradigm shift from focusing . Benefit Statements - Lifetime Income Illustrations, 85 Fed. +39 059 6231076 info@emmeciquattro.net. . Lifetime income illustrations under the SECURE Act require illustrations based on the participant's current account balance (as opposed to projecting it to normal retirement age). The lifetime income illustrations must still assume that payment commences on the last day of the statement period and that the participant or beneficiary is 67 (or actual age if older) on the date of commencement. Under the SECURE Act, Lifetime Income Illustrations are required to be provided to participants in participant-directed plans. 03.08.2022 New Lifetime Income Illustrations Required This Year. In converting the account balances into lifetime income streams, the calculator uses the safe harbor annuity conversion assumptions described in the ANPRM: A rate of interest equal to the 10-year constant maturity Treasury securities rate for the first business day of the last month of the period to which the statement relates (equal to 1.63% . Department of the Treasury, published a Request for Information about lifetime income and related issues in 2010. 1. Using model language, illustrations and assumptions provides relief from fiduciary liability. The IFR pertains to the information required by § 105 of the Employee Retirement Income Security Act of 1974, as amended (ERISA) to be . Additionally, the FAQs clarify that plan administrators can provide lifetime income illustrations in addition to those required by the Interim Rule, including lifetime income illustrations that project income increases to participants' account balances through age 65. 1. When Illustrations Must First Be Provided. The Department of Labor (DOL) had been considering what lifetime income disclosures might look like since 2010. "Although the SECURE Act requires plan administrators to provide participants with lifetime income illustrations that differ from the illustrations proposed in the department's 2013 ANPRM, the department's rule specifically allows for additional lifetime income illustrations," the agency's FAQs document says. By: Marc Purintun & Claire G. Pollock* The Setting Every Community Up for Retirement Act (the "SECURE Act"), passed at the end of 2019, adds a participant disclosure requirement that addresses a long-held concern of lawmakers that many participants are not sufficiently aware whether their defined contribution plan account . The DoL's justification is that this is supposed to mimic the pricing seen from insurers on annuity products. Lifetime Income Illustrations. Lifetime Income Illustration—Background. In fact, during 2013, the DOL came out with a proposal that would require a lifetime income stream illustration, to be displayed on a participant's benefit statement. For each of the 76.8 million defined contribution plan participants with account balances whose statements will include a lifetime income illustration, the Department estimates that the IFR will increase the cost of producing and distributing statements by $2.6 per participant in the first year, . Written testimony. 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