If you sponsor a defined contribution retirement plan, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 now requires additional information be provided to your plan participants on their quarterly account statements. Along with their current account balance, two lifetime income illustrations must now be included once a year. This is intended to help your plan participants understand their current account balance in terms of what it means for them at retirement so they can be better prepared.
When is this required to start?
The Act’s interim final rule was issued on 9/18/21 and the first illustration must be provided within 12 months of that date. The start date will depend on the type of accounts included in your plan.
- Participant-directed accounts which receive quarterly benefit statements: Illustrations must be included on the 6/30/22 quarterly statement (if not already provided on the 3/31/22 statement).
- Non-participant-directed accounts: Illustrations must be included on the statement for the first plan year ending on or after 9/19/21 and must be furnished no later than the filing of the annual return for that year. For calendar year plans, this will be the 12/31/21 statement, furnished no later than 10/15/22.
What illustrations are required?
The following will be provided regardless of the participant’s actual marital status:
- A single life annuity (SLA): This will show a fixed monthly amount for the life of the participant, with no surviving benefit to a spouse after their death.
- A qualified joint and 100% survivor annuity (QJSA): This will show a fixed monthly amount for the life of the participant, and the same fixed monthly amount to the surviving spouse after the participant’s death.
What assumptions are used for the illustrations?
Age: 67 (or actual age, if older)
Interest rate: 10-year Constant Maturity Treasury rate (10-year CMT) as of the first business day of the last month of the statement period. The 10-year CMT approximates the rate used by the insurance industry to price immediate annuities.
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This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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