Definition
The SECURE Act lifetime income provisions are the elements of the 2019 Setting Every Community Up for Retirement Enhancement Act addressing lifetime income in defined contribution plans, including the fiduciary safe harbor for annuity selection, portability, and lifetime income disclosure.
Why it matters
The SECURE Act, enacted in December 2019, was the first major federal legislation to address the mechanics of lifetime income delivery inside defined contribution plans. Its lifetime income provisions removed structural barriers that had discouraged plan fiduciaries from offering annuity options — most importantly, the absence of a clear safe harbor for carrier selection. Whether the provisions have produced the expected acceleration in in-plan lifetime income adoption is empirically contested; the structural changes themselves are settled law.
How it works
The SECURE Act's lifetime income provisions comprise three principal elements. The fiduciary safe harbor for annuity selection — codified as ERISA Section 404(e) — establishes procedural requirements that, when followed, shield a plan fiduciary from liability arising from an insurance carrier's future inability to satisfy its financial obligations under the contract. The portability provision permits plan participants to preserve their lifetime income arrangement when a plan sponsor discontinues the underlying investment option or the participant leaves the plan, avoiding forced surrender at a discount to actuarial value. The lifetime income disclosure requirement obligates plan sponsors to include on participant benefit statements — at least annually — an illustration of the lifetime annuity income the current account balance could produce, using assumptions specified by the Department of Labor's September 2020 final rule (a single life annuity commencing at age 67 with a 10 percent interest rate assumption and specified mortality basis).
In practice
For a participant, the SECURE Act lifetime income provisions surface most tangibly on the annual benefit statement, where the lifetime income illustration converts the account balance into a monthly income figure at retirement. The illustration is a required regulatory disclosure using standardized assumptions rather than a personalized projection or a quote; a participant using the figure for planning should understand it as a rough calibration reference rather than a firm number. For plan sponsors and fiduciaries, the provisions affect what in-plan lifetime income options can be offered and under what selection process. For advisors and consultants, they affect the range of arrangements a plan client can consider and the documentation required if an in-plan annuity is added to the investment menu.
Related terms
- SECURE 2.0 Act lifetime income provisions
- Fiduciary safe harbor for annuity selection
- Safe harbor annuity selection
- Lifetime income disclosure requirement
- Portability of lifetime income options
- In-plan lifetime income option
- ERISA fiduciary
- Department of Labor