Ledbetter Parisi LLC
Deadline to Provide Lifetime Income Illustrations on Defined Contribution
The SECURE Act, legislation passed in December 2019, requires 401(k) plans to include two lifetime income illustrations on benefit statements at least annually. The Interim Final Rule published September 2020 described how a plan must calculate the estimated lifetime income stream that a participant account balance could generate, but did not clarify the applicability date of the requirement and the method for furnishing the benefit statement. This IFR became effective on September 18, 2021.
To clarify the requirements, the DOL recently published a set of FAQs. The FAQs make clear that 401(k) plans must include the lifetime income illustrations on only one quarterly statement per 12-month period. Plans must first comply with the IFR on a benefit statement for a quarter ending within 12 months after the effective date of the IFR, which is September 18, 2022. Therefore, the latest plans can distribute the first lifetime illustration on any quarterly statement is the second calendar quarter of 2022 (ending June 30, 2022). A delivery in the third quarter—with ending date on September 30, 2022—would be after the expiration of the applicable 12-month period beginning September 18, 2021.
While the final regulation has yet to be published and may ultimately change the substance and timing requirements, plan should meanwhile begin preparing to comply with the IFR and FAQs as the deadline for compliance approaches.