What are the New Rules about Retirement Disclosures?

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A new law was recently enacted that covers a wide variety of retirement plan changes for both employers and individuals. The SECURE Act includes a new requirement for employers that sponsor tax-favored contribution retirement plans that fall under ERISA.

Benefit statements will now need to include at least one-lifetime income disclosure to plan participants for 12 months. The information will need to include the monthly payments that an employee would receive if the total retirement account balance were used to provide lifetime income streams. This statement should include a single-life annuity and a joint and survivor annuity for the participant and/or the participant’s surviving spouse.

What background information should I know?

ERISA requires that a contribution plan administrator must provide participants with benefit statements. While there is some discretion allowed, these statements must be submitted quarterly, yearly or upon written request. The U.S. Department of Labor (DOL) did provide advance warning of issuing rules that would have affected benefit statements back in 2013. These statements to plan participants need to include an estimated lifetime income stream of payments based on the account balance of the participant.

Some companies began providing this information even though it wasn’t yet required. However, employers will soon have to begin providing this vital information to their employees about lifetime income streams.

When will this become effective?

Fortunately, the effective date of the statement requirement will be delayed until after the DOL officially issues guidance. The delay means that it will not be required until 12 months after the DOL releases a final rule. The law also directs the DOL to develop a model disclosure.

It is essential to know that plan fiduciaries, plan sponsors, or others won’t have liability under ERISA solely because they provided the lifetime income stream equivalents. This protection is only available as long as the equivalents in the statement are created by following the guidance from the DOL. The reports should also include the explanations provided by the model disclosure.

Why stay informed?

Critics of the new rules argue that the required disclosures will lead to confusion among retirement plan participants. Critics also question how employers will calculate the income projections. For now, employers have to wait for the DOL to act. JLK Rosenberger can update you when that happens. Call us at 949-860-9890 or click here to contact us if you have questions about this requirement or other provisions in the SECURE Act.