Understanding Retirement Savings: Lifetime Income Illustrations


Chances are good that your company’s employees need to save more toward retirement. This is true across the country. New lifetime income disclosures mandated by the SECURE Act, aim to educate employees—and motivate them to save more.

Mandating Lifetime Income Disclosures

Keep in mind that when it was passed in 2019, The Setting Every Community Up for Retirement (SECURE) Act put a variety of new regulations into motion. As reported by The National Association of Plan Advisors:

The wide-ranging legislation draws from several bipartisan bills to improve upon the success of the private employer-based retirement system by seeking to make it easier for businesses to offer retirement plans and for individuals to save for retirement.

Recently, the Department of Labor’s Employee Benefits Security Administration (EBSA) released the Interim Final Rule (IFR) related to implementing one of the important new regulations: lifetime income disclosures.

EBSA has responsibility for the over 660,000 defined contribution plans covered by the Employee Retirement Income Security Act,  (ERISA). There are over 102 million workers participating in these plans. To increase their knowledge about how much they need to be saving, EBSA wants them to receive examples of how their savings play out as monthly retirement income installments. As noted on the associated DOL Fact Sheet:

EBSA believes that illustrating a participants account balance as a stream of estimated lifetime payments, in accordance with the IFR, will help workers in defined contribution plans to better understand how their account balance translates into monthly income in retirement and therefore to better prepare for retirement.

Guidance on Calculating Lifetime Income Illustrations

Plan Sponsors need to refer to the IFR (details here) for important information and examples about how to provide the lifetime income illustrations.

The Plan Sponsor Council of America reports that:

Basically, the SECURE Act outlined the what,” this interim final rule outlines how.

Producing those numbers requires five pieces of information – the account balance, the date of starting payments, the age on which the annuity starts, the interest rate and an estimated end date for the payments.

Specifically, the IFR provides details about each of the assumptions plan administrators must use to calculate the lifetime income illustrations. Assumptions cover these five points:

  • Commencement date
  • Age
  • Spousal/Survivor benefits
  • Interest Rate
  • Mortality


Complying With the Regulations: Remember ERISA!

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