Lifetime Income Illustrations

These blasted things. The DOL has stated:

Section 105(a)(2)(B)(iii) of ERISA provides that participant-directed individual account plans that furnish quarterly benefit statements under ERISA § 105(a)(1)(A)(i) must include the lifetime income illustrations on only one pension benefit statement in any 12-month period.

So let's look at a participant directed quarterly valuation plan. Suppose the 12/31/2022 valuation is completed, and the valuation and lifetime income illustration is sent on February 15, 2023. Then the 12/31/2023 valuation and lifetime income illustration is sent on March 31, 2024. This is more than 12 months later. What's your interpretation on this? Is it out of compliance? 

I think any reasonable person would interpret "in any 12-month period" as referring to the period, not the actual date of the statement. If not, they'll have to get over it. It's not on my worry list.

I agree with Bird on measuring the 12-month period, but wouldn't a 12/31/23 statement sent on 3/31/24 be late under the 45-day period in DOL FAB 2006-3? 

In either case, if you sent the 12/31/22 statement on 2/10/23, then sent the 12/31/23 statement on 2/11/24, I think you're still fine. 

Thank you both for the comments.  FWIW, the reason I'm concerned with this because I don't necessarily find the DOL to be reasonable...

The rule’s first sentence calls for a lifetime-income illustration “[a]t least annually[.]” 29 C.F.R. § 2520.105-3(a) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/subpart-F/section-2520.105-3#p-2520.105-3(a).

Even in the rule’s context, the use of the word “annually” in that sentence is ambiguous.

Although it is not the situation you ask about, the statute calls for a pension-benefit statement (of which a lifetime-income illustration is an element) “at least once each calendar year to a participant or beneficiary who has his or her own account under the plan but does not have the right to direct the investment of assets in that account[.]” ERISA § 105(a)(1)(A)(ii), unofficially compiled as 29 U.S.C. § 1025(a)(1)(A)(ii) (emphasis added) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1025%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1025)&f=treesort&edition=prelim&num=0&jumpTo=true.

Even if a plan’s administrator must furnish statements quarter-yearly: “In the case of pension benefit statements described in clause (i) of paragraph (1)(A), a lifetime income disclosure under clause (iii) of this subparagraph shall be required to be included in only one pension benefit statement during any one 12-month period.” ERISA § 105(a)(2)(B) (flush language) (emphasis added), unofficially compiled as 29 U.S.C. § 1025(a)(2)(B).

Also, the statute provides: “In no case shall a participant or beneficiary of a plan be entitled to more than 1 statement described in subparagraph (A)(iii) or (B)(ii) of subsection (a)(1), whichever is applicable, in any 12-month period.” ERISA § 105(b), unofficially compiled as 29 U.S.C. § 1025(b).

While the statute’s text is unclear, a fair reading should consider the statements’ intervals and dates, not when a statement is delivered or furnished.

To implement lifetime-income illustrations for a plan for which the administrator regularly furnishes quarter-yearly statements, I’d suggest the administrator decide which of a year’s four statements regularly gets the illustration, and then regularly follow that course year after year.

Neither a court nor the Labor department should find that an administrator violated ERISA § 105 because a delivery of an illustration was more than 12 months after the delivery of the preceding illustration if the statement dates the illustrations are grounded on are only 12 months apart.

Thanks for the detailed analysis!

6 hours ago, Belgarath said:

FWIW, the reason I'm concerned with this because I don't necessarily find the DOL to be reasonable...

Understood. I think I made my statement with the intent of adding some snark and got distracted.