An Interim Final Rule (IFR) published by the Department of Labor (DOL) took effect September 18, 2021. The IFR pertains to the information required by § 105 of the Employee Retirement Income Security Act of 1974, as amended (ERISA) to be provided on pension benefit statements. This regulation reflects amendments made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”) to ERISA § 105. The DOL received written comments on this interim final rule up until November 17, 2020.

Section 105 of ERISA requires administrators of defined contribution plans to provide periodic pension benefit statements to participants. Benefit statements contain a record of a participant’s “total benefits accrued” as a lump sum amount based on the participant’s plan balance. These statements must be furnished a minimum of once per year, or at least each quarter if the plan allows participants to direct their own investments in their individual accounts. 

The SECURE Act amended ERISA’s participant disclosure rules by requiring defined contribution plan administrators to provide participants with two new “lifetime income illustrations” a minimum of once per year. The purpose of this new disclosure is to help participants better prepare for retirement by providing two alternative illustrations of their estimated monthly payments if their account balance was converted into a stream of lifetime payments. Hopefully, this will help participants better understand how their savings converts into an estimated monthly payment for their lifetime and how this affects their retirement planning.

The two alternatives are:

  1. A single-life annuity (with payments over the participant’s lifetime); and
  2. A qualified joint and survivor annuity (with equal payments over the participant and spouse’s lifetime).

The regulation provides plan administrators with a set of assumptions for preparing the lifetime income illustrations, as well as model language for use on benefit statements. The interim final regulation also requests comments on the requirements and methodologies of the new regulation.

There are two compliance deadlines for retirement plans to satisfy the annual lifetime income illustration requirement:

  • Participant-directed individual account plans that furnish quarterly statements must incorporate the lifetime income illustration by the second calendar quarter of 2022.
  • For non-participant-directed individual account plans, the lifetime income illustration must be included on the first statement for the plan year ending on or after September 19, 2021. Typically, annual plan year statements for the calendar year 2021 would be furnished no later than the last date for filing the plan’s annual return, October 15, 2022.

Plan sponsors may implement these statements at an earlier time that conforms to their plan’s current benefit statement distribution cycle. If not, they must know these deadlines and work with their plan’s administrators to ensure that procedures are established that allow them to provide the newly required lifetime income illustrations in their future annual pension benefit statements. 

HBL has experience in all areas of Employment and employment law, offering a comprehensive solution to all your business Employment and HR/employment needs. We help ensure that you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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