The Department of Labor has issued guidance on implementing the final rule of the Secure Act lifetime income illustration provisions.
Under the Secure Act, plan sponsors must disclose a participant’s account balance as both a single life annuity and joint and survivor annuity income stream. Plans must furnish lifetime income illustrations annually (or more frequently). The illustrations can be incorporated into any quarterly statement up to the second calendar quarter of 2022.
Plans are not required to incorporate information about the account’s earnings over the years, but plans are permitted to provide additional lifetime income illustrations as long as the required illustrations are also provided.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the effectiveness of the new post-Secure Act lifetime income illustrations.
Below is a summary of the debate that ensued between the two professors.
Byrnes: These new lifetime income illustrations go a long way to help retirement savers understand the benefits of annuitization and generating a stream of guaranteed lifetime income for the future. It’s not an exact science, and we need to make sure that the rules are manageable enough for plan sponsors to comply without undue hardship and unworkable administrative burden.
Bloink: Under the current rules, the new lifetime income illustrations must show the lifetime income amount if the taxpayer’s retirement account was converted into a single life annuity and if it was converted into a joint and survivor annuity.