As required by the SECURE Act of 2019, the U.S. Department of Labor (DOL) published an interim final rule requiring plan administrators of individual account plans (including 401(k) plans, 403(b) plans and other defined contribution plans) to express a participant’s current account balance as both a single life annuity and a qualified joint and survivor annuity income stream.

These new disclosures are intended to help participants better understand how the amount of money they saved so far converts into an estimated monthly payment for the rest of their lives for purposes of retirement planning. However, the DOL’s regulations will provide a very rough estimate of the value of a participant’s benefit as an annuity because they are based on hypothetical assumptions involving the participant’s age, the annuity start date and the survivor annuity percentage, as discussed below. This approach simplifies the disclosures from an administrative perspective by minimizing the participant-specific data that must be taken into account.

The lifetime income illustrations must be furnished to participants at least annually, within one of the quarterly statements for the year. The DOL guidance provides:

• A suggested presentation for the illustrations;
• Standard assumptions that must be used to convert a participant’s account balance to a lifetime income stream (commencement date and age, marital status, survivor annuity percentage, interest rate, and mortality) and substitute assumptions for annuity contracts; and
• A model notice that may be used for benefit statements to explain the assumptions and obtain relief from liability for the illustrations.

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