ERIC Explores Lifetime Income Proposal

We hope you were able to join us for today's call on lifetime income disclosures on benefits statements.The Department of Labor (“DOL”) has issued an advanced notice of proposed rulemaking (ANPRM) that would require benefit statements for defined contribution plans to include the participant’s account balance and an estimated lifetime stream of payments. An “ANPRM” is a “pre-rule” or a step an Agency can take prior to issuing proposed regulations.

In its ANPRM, the DOL is considering various alternatives to regarding the methodology of disclosing estimated lifetime streams of payments, including requiring plans to:

• Convert the participant’s current account balance to an estimated lifetime income stream of payments, assuming the participant had reached normal retirement age under the plan as of the date of the benefit statement. 
• Show the projected account balance, as well as the lifetime income stream generated by it for participants who have not yet reached normal retirement age. The participant’s current account balance would be: (1) projected to normal retirement age, based on assumed future contribution amounts and investment returns; and (2) then converted to an estimated lifetime income stream of payments, assuming that the person retires at normal retirement age. 
• Include both Options 1 and 2 as estimated monthly payments based on the expected mortality of the participant or beneficiary. If the participant has a spouse, the projections would need to be based on the joint lives of the participant and his/her spouse. 

During today's call, we discussed the proposal and what it might mean for our members. If you missed the call, the materials are available here.

The DOL had already issued a Request for Information (RFI) in 2010. Thus, this is the second round of questions asked by the DOL on this issue and is based on the responses it received to the RFI. ERIC has previously responded to the DOL’s Request for Information (available here) and testified on this issue (available here). In our response to the RFI, we encouraged the DOL to establish a website that allows individuals to make such estimates based on their individual circumstances and opposed a mandated illustration on benefit statements.

During the call, Kathryn Ricard and Debra Davis of ERIC provided an overview of the ANPRM and ERIC’s position on the RFI and Seth Safra of Covington & Burling highlighted particular concerns for large employers.

If you're an ERIC Member, please be sure to let us know what you think of the DOL's proposal by contacting Kathryn Ricard or Debra Davis.