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Defined Contribution Retirement Plans: Are You Ready for Lifetime Income Disclosures? DOL Issues Interim Guidance

on Thursday, 17 September 2020 in Labor & Employment Law Update: Sarah M. Huyck, Editor

In August, the Department of Labor issued an interim final rule (the “Rule”) implementing the requirement that defined contribution retirement plans provide participants with lifetime income disclosures each year.  The rule comes in response to the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”), passed in December 2019.  (For more information on the SECURE Act, click here.)

As background, the SECURE Act requires defined contribution plan administrators to provide lifetime income disclosure statements at least every 12 months to plan participants.  To help workers understand how savings translate to retirement income, these disclosure statements would show how much money participants couldget each month if their total account balance were used to purchase an annuity. 

The Rule applies to all ERISA-covered defined contribution plans, regardless of whether the plan offers annuities or lifetime income investment options.  The disclosures must include two illustrations of a participant’s account balance – one lifetime income equivalent as a single life annuity and another as a qualified joint and survivor annuity, regardless of whether the participant is married.  The Rule outlines a number of assumptions that must be used when preparing the disclosures, including:

  • The commencement date of payments is the last day of the statement period, regardless of the participant’s actual age;
  • The participant is age 67 on the assumed commencement date (unless the participant is, in fact, older than age 67, in which case the participant’s actual age must be used);
  • The participant is married and the participant’s spouse is the same age as the participant;
  • The interest rate is equal to the 10-year constant maturity Treasury securities yield rate as of the first business day of the last month of the statement period;
  • Use of the unisex mortality assumptions;
  • The participant is 100% vested in the account; and
  • For participants with an outstanding plan loan, the loan will be fully repaid by the time the participant retires.

The illustrations can be presented in a chart.  For example, assume a participant is age 40 and is single.  Her account balance on December 31, 2022, is $125,000.  The 10-year constant maturity Treasury interest rate is 1.83% per annum on the first business day of December.  This participant’s illustration would show:

Account Balance

Single Life Annuity

Qualified Joint and 100% Survivor Annuity


$645 per month, for the life of the participant (assuming the participant is age 67 on December 31, 2022)

$533 per month for the life of the participant, and $533 per month for the life of the participant’s surviving spouse (assuming the participant and his or her spouse are both age 67 on December 31, 2022)


The Rule includes model disclosure language that may be integrated into existing benefits statements.  Alternatively, plan administrators may use a model supplemental disclosure that may be appended to existing benefits statements.  If the plan administrator uses the model language or the model supplement, and calculates the lifetime income illustrations using the assumptions set forth in the Rule, the plan fiduciary will be shielded from liability. 

While the Rule does not go into effect for at least 12 months, employers should begin considering how the lifetime income disclosures will be made.  Administrative services agreements may need to be updated to include the preparation of these disclosures by third-party administrators.

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