On
February 3, 2011, Senators Jeff Bingaman (D-NM), Johnny
Isakson (R-GA) and Herb Kohl (D-WI) introduced the Lifetime
Income Disclosure Act (S. 267). A similar bill was introduced
in 2009. The purpose of this proposed legislation is to
educate participants on the amount of monthly income that
could be provided by their defined contribution (DC) account
balance. Ultimately, it is intended to encourage participants
to annuitize at least a portion of their account balance.
Lifetime
Income Disclosure
Under
the proposal, DC plans would be required to include on
benefit statements the estimated amount of lifetime income
that could be provided with the participant’s account
balance. The statement would need to include the monthly
income amount under both a single life annuity and a qualified
joint and survivor annuity. The lifetime income disclosure
would need to be included in one pension benefit statement
during a 12-month period.
DOL
to Provide Rules and Model Disclosure
The
proposed legislation directs the Department of Labor (DOL)
to issue a model benefit statement that explains:
- The
lifetime income amounts on the benefit statement are
illustrative only.
- The
actual lifetime income amount a participant may receive
depends on numerous factors and may vary substantially
from the amount on the statement.
- The
assumptions used to determine the estimated income amounts.
The
DOL is also directed to issue rules that would detail:
- Assumptions
that may be used to convert a DC account into a lifetime
income amount. The proposed legislation allows the DOL
to decide whether to require a single set of specific
assumptions (i.e. a specific table or factor), or allow
conversions based on a range of permissible assumptions.
- Rules
on the specifics of the disclosure. For example, the
proposed legislation allows the DOL to decide if the
lifetime income amount should be disclosed as a deferred
income payable at normal retirement, or an immediate
income amount.
Next
Step
No
action is needed at this time since this is proposed legislation.
The proposed legislation has been referred to the Senate
Committee on Health, Education, Labor and Pensions for
review. We will keep you informed of any developments.
The information contained on these pages is for
general educational purposes only, individuals should
consult their financial advisor or legal counsel to
determine how these regulations affect their unique
situation
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