Specifically, according to a press release, under the Lifetime
Income Disclosure Act, defined contribution plans subject to the Employee
Retirement Income Security Act (ERISA) would be required annually to inform
participants of how the account balance would translate into guaranteed
monthly payments based on age at retirement and other factors. To ensure
there is no material burden or potential liability on employers who voluntarily
sponsor 401 (k) plans, the legislation directs the Department of Labor to issue
tables that employers may use in calculating an annuity equivalent, as well as
a model disclosure.
Employers and service providers using the model
disclosure and following the prescribed assumptions and DOL rules would be
insulated from liability.
According to the announcement, the measure is patterned
on the Social Security Administration’s annual statements, which are mailed
annually to working Americans to inform them of estimated monthly benefits
based on their current earnings. “By providing similar information for
401(k) plans, the Lifetime Income Disclosure Act would give American workers a
more complete snapshot of their projected income in retirement,” the
The press release included statements backing the
legislation from the AARP, the Women’s Institute for a Secure Retirement, and the
Retirement Security Project.
“Including a disclosure of how much monthly income a
worker can expect from 401(k) savings will encourage younger workers to save
more for retirement, and older ones to convert their savings into annuity-like
products so that they won’t outlive their savings. The Act will build
greater retirement security for everyone at virtually no cost to the taxpayers,
employers, or workers,” said David John, senior research fellow at the
Heritage Foundation and principal of the Retirement Security Project, in the news release.