Definition
The lifetime income disclosure requirement is the SECURE Act mandate that defined contribution plan sponsors provide participants at least annually with an illustration of the lifetime annuity income their current account balance could produce.
Why it matters
Defined contribution plan participants receive account balance figures continuously — on quarterly statements, through recordkeeper portals, in year-end summaries — but until the SECURE Act's disclosure requirement, no standardized translation of the balance into a lifetime income figure was mandated. The disclosure requirement introduces a required annual reference point for participants translating accumulated savings into potential retirement income. Whether the specific disclosure produces meaningful behavioral change is empirically contested; the structural requirement is settled.
How it works
The disclosure requirement obligates defined contribution plan sponsors to include on participant benefit statements — at least annually — an illustration showing the monthly annuity income the participant's current account balance could produce. The Department of Labor's September 2020 final interim rule specified the required assumptions: a single life annuity commencing at the participant's actual age (or age 67, whichever is later), an interest rate assumption equal to the 10-year constant maturity Treasury rate as of the first business day of the month preceding the statement period, and a mortality basis specified in the rule. The illustration is required for both a single life annuity and a qualified joint and 100 percent survivor annuity for participants with a spouse. Plan sponsors following the assumptions specified in the DOL rule receive protection from liability arising from the illustration's assumptions, provided the disclosure is otherwise consistent with the rule.
In practice
For a participant, the annual lifetime income illustration on the benefit statement is a standardized calibration reference — how much monthly income the current account balance could produce as a single life annuity beginning at age 67 or the current age (whichever is later), calculated using the DOL-specified assumptions. The figure is not a personalized projection: it assumes single life annuitization of the full balance at a standardized age using a standardized rate, and it does not incorporate the participant's actual planning age, marital status, portfolio, or income needs. Participants using the figure for planning should understand it as an anchor point — a "what this looks like as lifetime income" reference — rather than a firm prediction. For plan sponsors, compliance with the disclosure requirement is a recordkeeper deliverable in most cases; the practical fiduciary attention is to confirming the recordkeeper implementation follows the DOL rule and updating participant communications as the disclosure is added or refined.
Related terms
- SECURE Act lifetime income provisions
- Benefit statement
- Single life annuity
- Qualified joint and survivor annuity
- Department of Labor
- Cost of income
- Realized value
- Participant fee disclosure