June 5, 2013

Lifetime Income Illustration: the Department of Labor’s Advance Notice of Proposed Rulemaking

The Employee Benefits Security Administration (EBSA), an agency of the Department of Labor, believes that “illustrating an account balance as a lifetime income stream will help workers in defined contribution plans to better prepare for retirement.” For this reason, the agency has issued an “advance notice of proposed rulemaking” (ANPRM) requesting comments on whether (and how) an estimated lifetime income stream could be illustrated on participant statements.

The EBSA is considering future proposed regulations that would require the inclusion of a lifetime income illustration on statements, and the ANPRM lays out what those rules might include. The ANPRM suggests that participant statements show:

  • An estimated lifetime income stream based on their current account balance (using the assumption that the participant is at normal retirement age as of the date of the statement, regardless of his or her actual age).
  • An estimated lifetime income stream based on a projected account balance, estimated by assuming future contributions and investment returns, and a retirement at normal retirement age. The projected account balance and income stream would be expressed in current dollars.
  • Both illustrations would show the income stream as a monthly payment based on the expected mortality of the participant or, if married, the joint lives of the participant and spouse.
  • Statements would include an understandable explanation of the assumptions used and a disclaimer stating that the projections and lifetime income illustrations are estimates only and not guarantees.

Public comments are invited on the ANPRM until July 8, 2013. You can submit and read comments at the Federal eRulemaking portal at www.regulations.gov. You can also submit comments by email to e-ORI@dol.gov.

To read the fact sheet on the ANPRM, visit http://www.dol.gov/ebsa/newsroom/fsanprm.html.