Administrators of defined contribution retirement plans, such as 401(k) plans, are required under ERISA to provide participants with periodic pension benefits statement. On August 18, EBSA released an interim final rule (IFR) that requires such administrators to include two lifetime income illustrations on such statements – one as a single life annuity (SLA) and another as a qualified joint and survivor annuity (QJSA) – at least annually. The IFR contains assumptions that plan administrators must use to calculate the monthly payment illustrations (including on assumed commencement date, age, spousal and survivor benefits, interest rate and mortality). The plan administrators must provide various explanations about the estimated lifetime income payments to participants, and the IFR provides model language to meet these requirements.
The IFR provides that no plan fiduciary, plan sponsor or other person will be liable under ERISA for providing lifetime income illustrations if the actual monthly payments in retirement fall short, provided the calculations were made using assumptions set forth in the IFR and the statements used the model language (or substantially similar language). Comments on the IFR are due no later than 60 days after its publication in the Federal Register, and the IFR will be effective one year after the publication. The EBSA intends to issue a final rule in advance of that IFR effective date.
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