401(k) Lifetime Income Illustrations

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Posted on September 3rd, 2021

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. 

The DOL’s Employee Benefit Security Administration (EBSA) posted Temporary Implementing FAQs which clarify points not addressed in the interim rule.  The FAQs address concerns on when the first illustrations must be included on participant statements. 

For participant-directed plans (participants choose their investments), plan administrators have until June 30, 2022 to include the illustrations. After that, they must be included on at least one benefit statement each subsequent 12 month period.  

Sponsors of non-participant-directed plans must include the first illustrations on the statement for the 2021 calendar year. The statement is normally provided after tax filing – no later than October 15, 2022.

The income streams will be shown on statements as a fixed monthly payments – both as single life annuity, and as a joint and survivor annuity. The illustrations use the participant’s account balance on the last day of the statement benefit period, and assumes their age is 67 (unless they are older than 67). 

The illustrations do not take in account future contributions, or what the account balance might be when the participant is actually 67.  It will be noted that the estimated payments are for illustrative purposes only and are not guarantees.