On July 26, 2021, the DOL issued temporary implementing FAQs on the interim final rule (IFR) that implements the SECURE Act's requirement that ERISA-covered defined contribution plans disclose a participant's current account balance as both a single life annuity and a qualified joint and survivor annuity income stream. The IFR, which was published in the Federal Register in September 2020, will be effective on September 18, 2021, and it contains a series of required assumptions and explanations, as well as a model benefit statement supplement (85 Fed. Reg. 59132 (Sept. 18, 2020)) (to learn more about the IFR, see Practice Note, Lifetime Income Disclosures Under the SECURE Act and Legal Update, DOL Releases Interim Final Rule on Lifetime Income Illustrations Under SECURE Act).

The DOL issued the FAQs in response to numerous requests for clarification from commenters on the IFR with respect to the applicability date of the IFR and the method for furnishing benefit statements.

The DOL's response to the first FAQ specifies the earliest statement for which the lifetime income illustrations are required content for participant-directed plans, such as 401(k) plans. Because plans must furnish the lifetime income illustrations at least annually, the earliest statement for which the lifetime income illustrations are required for plans that issue quarterly statements is a statement for a quarter ending within 12 months after the IFR's effective date. Therefore, since the effective date of the IFR is September 18, 2021, plans that must issue quarterly statements under ERISA Section 105(a)(1)(A)(i) (29 U.S.C. § 1025(a)(1)(A)(i)) can incorporate their first lifetime illustration on any quarterly statement up to the second calendar quarter of 2022, which ends June 30, 2022. The illustration may not be delayed beyond the second calendar quarter of 2022 because the ending date of the third calendar quarter, September 30, 2022, would be after the expiration of the 12-month period.

The response to the second FAQ specifies the earliest statement for which the lifetime income illustrations are required content for non-participant-directed plans, in which a participant or beneficiary has his or her own account but does not have the right to direct the investment of assets in that account. For these plans, the lifetime income illustrations must be on the statement for the first plan year ending on or after September 19, 2021. For most of these plans, this will be the statement for calendar year 2021, which would be furnished no later than October 15, 2022, which is the last date for timely filing the annual return for that year for a calendar year plan.

The response to another FAQ explains that even though the SECURE Act requires plan administrators to provide participants with lifetime income illustrations that differ from the illustrations proposed in the DOL's 2013 Advance Notice of Proposed Rulemaking (2013 ANPRM) (see Legal Update, DOL Issues ANPRM Seeking Input on Lifetime Income Illustrations for Benefit Statements), the IFR specifically allows for additional lifetime income illustrations, such as the framework included in the 2013 ANPRM, because the DOL recognizes that many retirement plans have been providing various types of illustrations for several years, including illustrations of the type contemplated by the 2013 ANPRM.

According to the preamble to the IFR, the DOL intends to adopt a final rule sufficiently in advance of the September 18, 2021 effective date. The public has asked whether the final rule will provide some transition relief if the final rule is not issued significantly in advance of the effective date. The response to the final FAQ explains that the DOL intends to issue a final rule as soon as practicable based on feedback from comments received during the public comment period on the IFR.

Plan administrators, plan sponsors, and service providers should familiarize themselves with the FAQ guidance and look for the DOL's final rule on the lifetime income illustrations under the SECURE Act, which, as the FAQs affirm, the DOL intends to issue before September 18, 2021.

To learn more about the requirements of the SECURE Act, see the SECURE Act Compliance Chart.