QOTW: Lifetime Income Projections

Nearly 60 percent (57.5 percent) of readers indicated that they already provide lifetime income projections to participants.

This is up from the 42.5 percent that indicated they do in last year’s annual survey (2019 plan data), perhaps indicating that companies are moving to comply with the lifetime income mandate set to go into effect in September.

One aspect that the annual survey captured that we did not in our ICYMI poll is that smaller companies were twice as likely to already be providing these projections than large companies — only a quarter of plans with 5,000 or more particpants were provinding them. 

There seems to be some confusion about the effective date for when plan sponsors must provide these projections in compliance with the SECURE Act provision. The effective date of the new rule is September 18, 2021 – plan sponsors must provide the income projections on at least one benefit statement within 12 months after that date (and a minimum of once a year going forward). If a plan provides quarterly statements, the projections must be included by the June 30, 2022 benefit statement in order to comply with the provisions.

Plan sponsors in a recent Defined Contribution Insights article indicated that the biggest hurdle they will face is explaining the statements and many indicated they are going to proactively educate employees on what the projections mean prior to disseminating them.

Other comments from ICYMI readers on the lifetime income disclosures are:

• While I believe this is a worthwhile improvement to the 401k arena, I'm excited to get details on how it can assist employees with their decision making.
• Currently, provided as tools within each employees account online on our providers website.  But I feel the mandate could create is inappropriate as it could result in litigation if employees depend on projections that don't play out in reality.
• Doesn't apply to us since we are a 403(b)(9) plan.  Regardless, we are thinking of mirroring the projections but using relevant assumptions.
• I like it and am looking forward to offering it.
• I think it's a good idea. Many participants are in the dark and focus on immediate needs and not long-term needs. They need to realize as they get closer to retirement that they may not be on track to retire timely. I would encourage more estimates and projections for saving.
• It's not perfect but it's a step in the right direction
• It’s already here.  Didn’t seem to make much difference…
• Not in accordance with the IRS requirements, but our vendor gathers information from ppts and estimates monthly retirement income based on Monte Carlo /Financial Engines simulations.
• Our recordkeeper already provides a Lifetime Income Score (LIS) to help our participants understand if they are on track to meet their personalized income-replacement needs in retirement. The new regulation puts additional stipulations and requirements on the way this information is expressed, which I (speaking personally) believe is an inferior expression of this information, and may be confusing to the participant. We are anxiously awaiting information around how the recordkeeper will reconcile these two different expressions of the same information so that those who are used to following their LIS aren't confused by the new information seen on their statement.
• Our recordkeeper does offer calculators/modeling tools. However, the effective date of the new rule is 9/18/21. I believe this means that the illustrations must be included on at least one benefit statement during a 12 month period and each subsequent 12 month period after that time. I think we have until 6/30/22. Our recordkeeper is working on this.
• Our vendor's quarterly statement provides the projected annual income available in retirement based on your current balance and deferral elections.
• Said yes, assuming that the information that is available through our recordkeeper's online platform is sufficient.
• Standard procedure for us.
• Unclear on actual date when this is required to be provided
• We already offer an annuity product to our employees, but 2/3 of our participants are not invested in it.  I am not convinced that providing the lifetime income projections will help participants or just confuse them even more than they already are when it comes to retirement.
• We are already providing lifetime income monthly projections on our annual statements.
• We run estimates from the DB Plan for employees based on service/age.