Lifetime Income Statements

I have been doing this a LONG time, but I think I may have missed an important class somewhere along the way.

1)  If a plan offers self-direction, the participants are getting monthly statements from the brokerage firm (ie, Merrill Lynch) or online platform (ie, Empower).  These statements should satisfy the quarterly requirement.   I do not prepare quarterly statements because my clients do not wish to pay me to do so. 

2) If a plan does not offer an annuity form of payment, what purpose do these silly things serve?  

Thanks.

Because the DOL feels...

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EBSA believes that illustrating a participant’s 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.

...and has made it a rule for plans to supply it to participants at least annually.

Congress added the requirement for lifetime income disclosure to ERISA § 105 in the SECURE Act.

40 minutes ago, Anon401kTPA said:

If a plan does not offer an annuity form of payment, what purpose do these silly things serve?  

You provide it because it's legally required, and because if you don't, there is a penalty of up to $100/day/participant.

Whatever one thinks of the public policy of ERISA’s requirement for a lifetime-income illustration, let’s put the responsibility where it belongs:

Congress amended ERISA to impose the requirement.

The Labor department made a rule to implement the statute Congress made.

And even that rulemaking is commanded by an Act of Congress.

Hah! Now I've got that stuck in my head for the rest of the day! An enjoyable little ditty. Better than some thing that they played on the radio while I was driving into work this AM - some oldie called, if I got it right, "She made toothpicks of the timber of my heart." It was charitably described as a "song." 

Thanks all.  

Lou S - you used the word "annually".  Does my point #1 hold true?  If the participant is being supplied statements monthly from their account-holder (platform or brokerage house), I would not need to duplicate that?

Do I need to check with said custodian to see if they are supplying a LIS?  Or do any of you know if they are/aren't?

Back to your word "Annually" - if they are getting monthly statements already, may I provide this LIS once per year?

Thanks again!  Sorry - I just hate crap legislation like this that raises WAY more questions from the participants than answers.  In fact, none of my plans offers an annuity, so this is really gonna bowl 'em over.

Seems like there is some confusion or conflation between the lifetime income statements and the quarterly/annual statements required by PPA. The OP did not seem to mesh with the subject line.

In any event, what C. B. Zeller said: "You provide it because it's legally required, and because if you don't, there is a penalty of up to $100/day/participant."

Account statements and lifetime-income illustrations both are elements of ERISA § 105(a) about pension benefit statements.

After the 1974 enactment, that section was amended in 1984, 1989, 2006 (Pension Protection Act), and 2019 (“SECURE”).

About the civil penalty, does anyone know what the $100 is adjusted to for a penalty assessed in 2022?

And has anyone estimated the 2023 amount?

Bird, I agree actually.  The quarterly statements are different than the Lifetime Income Statements.  I guess my better worded question would be:  do the custodians supply a LIS along with their monthly/quarterly statements that they are already preparing for participants?  This may be rhetorical, in that I need to address that with the custodian myself.

Editing this post to add that my guess is that the custodians are NOT producing any sort of LIS.

Thanks to all!  

It depends some custodians are providing them, others are not. You would need to check with each individually custodian. At a guess I would say "most" of the larger bundled providers have programing it for their quarterly statements by the 6/30/22 quarter that just ended and "most" individual brokerages statements are probably not providing it.

The Secure Act requires that the illustrations be provided "at least annually".

19 hours ago, Anon401kTPA said:

Editing this post to add that my guess is that the custodians are NOT producing any sort of LIS.

That is my take, at least as far as brokerage accounts as Lou S said, and I think that's what you are working with.

The LIS serve the purpose of letting participants know about how much life time income they would receive if they wanted to purchase an annuity.

The LIS is only required annually. So, if you are providing monthly or quarterly statements then one of these needs to include this additional information.

We have been getting several requests to help out administrators with the calculation of these amounts to be reported on the statement.

On 7/26/2022 at 3:45 PM, Anon401kTPA said:

If a plan offers self-direction, the participants are getting monthly statements from the brokerage firm (ie, Merrill Lynch) or online platform (ie, Empower).  These statements should satisfy the quarterly requirement.   I do not prepare quarterly statements because my clients do not wish to pay me to do so. 

Getting back to this part of the question—particularly the word "should"—it may be worthwhile to request a sample of these statements and compare them to the requirements of ERISA 105(a)(2) (apart from the lifetime income disclosure, which has already been addressed in this thread). My guess is that the platform-generated statements likely meet all the requirements, but the brokerage-provided statements may be missing things like the amount of the participant's vested balance, the diversification statement and the link to the DOL's website.

If the brokerage-provided statements are found to be lacking, you may wish to remind your clients of their obligations as the Plan Administrator, and see if that informs their decision as to whether or not they want to pay you to prepare statements.

On 7/27/2022 at 11:20 AM, Peter Gulia said:

Account statements and lifetime-income illustrations both are elements of ERISA § 105(a) about pension benefit statements.

After the 1974 enactment, that section was amended in 1984, 1989, 2006 (Pension Protection Act), and 2019 (“SECURE”).

About the civil penalty, does anyone know what the $100 is adjusted to for a penalty assessed in 2022?

And has anyone estimated the 2023 amount?

From the EBSA Fact Sheet on adjusting ERISA civil penalties for inflation https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/adjusting-erisa-civil-monetary-penalties-for-inflation.pdf

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The Federal Civil Monetary Penalties Inflation Adjustment Act Improvements Act of 2015 (2015
Inflation Act) requires EBSA to adjust ERISA’s civil monetary penalties annually for inflation. ERISA
monetary penalties assessed by a court (e.g., sections 502(c)(1) and (3)) rather than EBSA are not
adjusted for inflation under the 2015 Inflation Act. 

Since the $100/day penalty is under section 502(c)(1), it would appear that it is not adjusted for inflation. It does appear, however, that it was increased to $110 effective since 1997 under 29 CFR 2575.502c-1.

7 minutes ago, C. B. Zeller said:

Getting back to this part of the question—particularly the word "should"—it may be worthwhile to request a sample of these statements and compare them to the requirements of ERISA 105(a)(2) (apart from the lifetime income disclosure, which has already been addressed in this thread). My guess is that the platform-generated statements likely meet all the requirements, but the brokerage-provided statements may be missing things like the amount of the participant's vested balance, the diversification statement and the link to the DOL's website.

If the brokerage-provided statements are found to be lacking, you may wish to remind your clients of their obligations as the Plan Administrator, and see if that informs their decision as to whether or not they want to pay you to prepare statements.

Exactly, and I was very vaguely alluding to this in my first response. We provide a one-page statement with that particular info (from FTW) for such programs.