June 2021

DOL Issues Guidance on Lifetime Income Illustrations and a Model
Supplement to a Participant’s Benefit Statement

In general, a plan sponsor must furnish each plan participant with an annual pension benefit statement. Commencing with pension benefit statements furnished after September 18, 2021, such statements must discuss and express a participant’s current account balance in two ways. First, as a single life annuity income stream and then secondly as a qualified joint and survivor annuity income stream. Payments are to be made monthly. These new disclosures are required by the SECURE Act.

These income stream illustrations must be furnished at least annually and may be produced more frequently. Benefit statements must be provided at least quarterly if an individual account plan permits participants and beneficiaries to direct the investments of their account balance.

A participant benefit statement must set forth the following information

1. The statement period with a beginning date and an ending date.

2. The value of the individual’s account balance as of the last day of the statement period.

3. Such value must be expressed as an equivalent lifetime income stream payable in equal monthly payments for the life of the participant. This determination of a single life annuity must be determined using certain assumptions.

4. Such value must be expressed as an equivalent lifetime income stream payable in equal monthly payments for the joint lives of the participant and spouse. This determination of a qualified joint and survivor annuity (QJSA) must be determined using certain assumptions.

These two income streams are to be determined by using the following assumptions and factors.

1. The income payments would start on the last day of the statement period and it is assumed the participant is age 67 on the commencement date. However, if the participant is older than age 67, his or her actual age must be used.

2. For purposes of the QJSA, it is assumed the participant has a spouse who is the same age as the participant and the survivor annuity percentage is 100% of the monthly payment paid to both of them while both are a alive.

3. The interest rate used is the rate equal to the 10-year constant maturity Treasury securities yield rate for the first day of the last month of the period to which the benefit statement relates.

4. The mortality factor is determined by using the applicable mortality table under section 417(e)(3)(B) in effect for the calendar year which contains the last date of the statement period.

5. The participant’s value includes any outstanding loan unless such loan is in default.
The participant statement must set forth a comprehensive discussion of the lifetime income streams which have been calculated.

See the DOL model form for the topics which must be discussed and how comprehensively.