New Lifetime Income Illustrations Required This Year

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 balances would produce enough income at retirement.

To address this concern, the SECURE Act amended the Employee Retirement Income Security Act (ERISA) to require that administrators of ERISA-covered individual account defined contribution plans provide two “lifetime income illustrations” (the “Illustrations”) to participants at least annually to help participants understand how their account balance translates into monthly income.

Deadline for Disclosure

The disclosure requirement became effective September 18, 2021, and plan administrators are required to comply within 12 months. The Illustration can be provided as part of participants’ benefit statements that may be generated by a plan’s recordkeeper or other service provider.

• Participant-directed individual account plans that furnish quarterly benefit statements must incorporate the first Illustration on any quarterly statement?up to?the end of the second calendar quarter, ending June 30, 2022.
• For Individual account plans where the participant does not direct the investment of his or her account, the Illustration must be on the statement for the first plan year ending on or after September 18, 2021, which would be furnished no later than the last date for filing the annual return for that plan. For a calendar year plan, the deadline is October 15, 2022.

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