An estimate of DC plan participants’ lifetime income based on their accrued benefits, if one is to be included on participants’ benefits statements, should be “concise and easy to administer,” ASPPA advised the DOL’s Employee Benefits Security Administration last week.
ASPPA’s comment, expressed in an Aug. 7 letter to the EBSA, came in response to EBSA’s Advance Notice of Proposed Rulemaking (ANPRM) regarding a potential rule to require a participant’s accrued benefit in a defined contribution plan to be expressed on a participant benefit statement as an estimated lifetime stream of payments.
“In the context of the many disclosures that are required today, it is important that the lifetime income information be direct and to the point so participants can get a general sense as to the monthly lifetime income that can be expected from their savings,” the letter notes. “The calculation on the benefit statement should be focused, concise and provide information based on three prescribed earnings assumptions” — 3%, 5% and 7%, ASPPA suggested. For more individualized calculations, “participants should be directed to either the DOL online calculator or a similar online calculator provided by a private service provider.”
The comment letter addresses two other important points:
• Safe harbor for calculations should be included but modified — The DOL’s proposal must include a safe harbor for the assumptions used in calculating the lifetime income stream, the letter notes. Those assumptions, however, should be modified and limited, with the opportunity for more varied assumptions provided through an online calculator.
• DOL online calculator should be enhanced and its use encouraged —DOL’s existing online calculator should be enhanced, the letter suggests, and its use or the use of a private service provider online calculator should be encouraged so participants can individualize the assumptions used to calculate potential lifetime income distribution streams.
An ANPRM is a request for comments on specific language and concepts in advance of a proposed regulation. There is no timetable for proceeding to the next phase of the rulemaking process — that is, a proposed regulation.
