On July 26, 2021, the Department of Labor (Department) issued frequently asked questions (FAQs) regarding the interim final rule (IFR) on lifetime income illustrations (LIIs) that must be included in participants’ pension benefit statements for defined contribution plans on an annual basis. The IFR on LIIs, which we previously discussed in a client alert, will become effective on September 18, 2021. The FAQs respond to comments received in response to the IFR regarding the applicability date of the rules and method for furnishing benefit statements.
- Applicability Date: The earliest statement for which the LIIs are required differs depending on whether the defined contribution plan is a participant-directed plan or a non-participant-directed plan.
- For participant-directed plans (requiring quarterly statements), the first LIIs must be provided on a benefit statement for a quarter that ends prior to September 18, 2022. For calendar year plans, this means that the first LIIs must be provided in a quarterly statement for any quarter up to the second calendar quarter of 2022 (ending June 30, 2022).
- For non-participant-directed plans (requiring annual statements), the first LIIs must be on the statement for the first plan year ending on or after September 19, 2021. For calendar year plans, this will be the annual statement for calendar year 2021, which must be furnished no later than the last date for timely filing the annual return (October 15, 2022).
- Additional Lifetime Income Illustrations: The FAQs indicate that plan administrators may provide LIIs based on the framework published in the Department’s Advance Notice of Proposed Rulemaking in 2013. However, plan administrators must also provide lifetime income illustrations that comply with the requirements set forth in the IFR.
- Transition Relief: The FAQs provide that the Department intends to issue a final rule as soon as practicable. Although the FAQs do not delay the applicability date or otherwise provide transition relief, the FAQs suggest that the Department may be accommodating to plan administrators if the final rule differs materially from the IFR.
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