DOL Issues Rule on Lifetime Income Statements

Labor Department headquarters in Washington. (Photo: Mike Scarcella/ALM) Labor Department headquarters in Washington. (Photo: Mike Scarcella/ALM)

The Department of Labor’s Employee Benefits Security Administration released Tuesday an interim final rule intended to help workers estimate how their current savings in a defined contribution plan translates into lifetime monthly payments.

The rule implements Section 203 of the Setting Every Community Up for Retirement Enhancement (Secure) Act of 2019.

The Secure Act, signed into law by President Donald Trump, amended the pension benefit statement requirements under Section 105 of the Employee Retirement Income Security Act to require participants’ accrued benefits to be included on their pension benefit statement as a current account balance, and as an estimated lifetime stream of payments.

Using assumptions set forth in the rule, plan administrators would be required to show participants equivalents of their retirement savings as monthly income under two potential scenarios:

  • as a single life income stream, and
  • as an income stream that factors in a survivor benefit.

The department will open a 60-day comment period once the rule is published in the Federal Register.

“Our goal is to help workers and retirees understand how savings translate to retirement income,” said Jeanne Klinefelter Wilson, acting head of EBSA. “Defined contribution plan savings are meant to stretch across the years of retirement. When workers are reminded of what their balances could mean in terms of an estimated monthly dollar amount, they can use this information to plan both savings and spending.”

A senior department official said on a Tuesday morning call with reporters that “neither Secure nor the department rule requires participant to get their benefit as an annuity,” and that neither require DC plans to offer an annuity option.

“This is a critical distinction because it doesn’t force anyone to take retirement as a monthly annuity,” the official said.

In an email on Tuesday, the Insured Retirement Institute, a trade group for the annuity industry, stated that Labor’s rule “is designed to provide consumers with important information and perspective by illustrating retirement account balances as monthly income — much like a paycheck — and not only a lump sum. IRI research prior to the SECURE Act showed that consumers would not only welcome this information but would likely be encouraged to save more.”

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