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The Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) issued an interim final rule providing the important information employers need to comply with the new requirement that they give retirement plan participants annual illustrations of the monthly lifetime income they would receive from their retirement plan account balances.

"NAIFA strongly supports providing American employees with information to help them understand how their retirement savings will translate into monthly income down the road," said NAIFA CEO Kevin Mayeux. "This will help employees and their financial advisors create better retirement plans. NAIFA commends EBSA for these rules, which give employers much-needed certainty about how to meet their obligations under the new lifetime income disclosure rules."

The interim final rule (IFR):

  • States that a plan sponsor will be shielded from ERISA liability for a lifetime income illustration that complies with the IFR’s specific rules, and uses the IFR’s model language in plan participant benefit statements. This is important because illustrations may or may not reflect actual experience over the years. Plan sponsors need to know that they cannot be sued if actual experience varies from what is illustrated, so long as they follow the rules in the IFR.

  • Provides model benefit statement language

  • Specifies the assumptions that plan administrators must use to calculate the plan participant’s illustrated lifetime monthly benefits. These assumptions include the assumed start date of monthly benefits; the participant’s age at the time benefits payments start (normal Social Security retirement age (67) or, if the participant is older, his/her actual age); the assumed interest rate (10-year constant maturity Treasury rate); and how to calculate life expectancy (by use of the tax code’s gender neutral mortality table). The IFR includes an example of an illustration that complies with these rules.  

  • Includes special rules for annuities used in a retirement plan, including deferred income annuities.

The rule is to take effect one year after it is published in the Federal Register. Publication is likely the week of August 24. A public comment period will be open for 60 days from the date of Federal Register publication.

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