For Immediate Release
Washington, DC – The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America’s major employers, submitted comments today to the Department of Labor (DOL) recommending that it provide employers with flexibility regarding lifetime income disclosures.
The DOL issued an advanced notice of proposed rulemaking (Pre-Rule) on May 7 relating to providing lifetime income disclosures on benefit statements for defined contribution plans. The DOL is considering requiring that benefit statements include the participant’s current account balance, a projected account balance, and lifetime income examples.
ERIC commended the DOL for encouraging Americans to focus on the importance of adequately preparing for retirement and working to support the ongoing efforts of plans, but raised a number of concerns about the approach taken by the DOL in the Pre-Rule.
“Lifetime income disclosures should be voluntary, not mandatory and the guidance should be flexible enough to encourage innovation,” Kathryn Ricard, ERIC Senior Vice President for Retirement Policy, stated.
The letter points out that without a mandate, companies and service providers have been actively developing tools to educate workers on the importance of saving and retirement readiness. ERIC notes that imposing a mandate will only stifle creativity.
ERIC’s letter explains that the disclosures required by the Pre-Rule would be confusing and misleading for many participants, and expose companies to unnecessary fiduciary liability. ERIC is concerned that the DOL’s proposal would result in unrealistic expectations and confusion by participants as actual contributions, compensation, and investment earnings will not follow the DOL’s assumed patterns.
ERIC proposes alternatives that it believes would be more effective than the approach described in the Pre-Rule. ERIC recommends that the DOL instead: (1) promote a voluntary system with flexible guidance based on broad principles that will encourage innovation; and (2) encourage the use of online modeling tools, which will allow workers to explore a variety of scenarios based on their individual situations.
“Instead of paper disclosures, the Department should promote the use of online modeling tools. These dynamic tools would allow participants to generate more realistic projections for their scenarios, encourage action, and demonstrate interactively the uncertainty inherent in any projection,” Ricard said.
In the event the DOL insists on issuing regulations that mandate lifetime income disclosures, ERIC also provides detailed recommendations for improving the Pre-Rule.
ERIC’s letter can be accessed by clicking on the link below.