DOL seeks ways to show income streams

The Labor Department is taking another run at depicting how lifetime-income streams might look to participants in defined-contribution plans.

The regulatory agency last Monday posted an advance notice of proposed rule making, signaling that it is considering a rule that would require that workers’ accumulated benefits be expressed as an estimated lifetime stream of payments and as an account balance.

The announcement also ran in last Tuesday’s Federal Register, at which time the 60-day clock for public comments began ticking.

The Labor Department also is weighing a rule that would require that the benefits be projected to the retirement date and then converted as an estimated stream of income.

It isn’t the first time that the Labor Department has solicited comments on translating accrued savings into income. But this time it will allow the public to review the agency’s thinking and provide comments.

That will be followed by a proposal and an opportunity for further public input, and then a final rule will emerge, according to Bradford P. Campbell, an attorney at Drinker Biddle & Reath LLP and a former assistant labor secretary at the Labor Department’s Employee Benefits Security Administration.

“I’m glad they’ve taken a deliberate approach that will allow us to have a few rounds of comments,” Mr. Campbell said.

There are still some potential concerns even with this initial announcement, however.

For instance, mandating plans to depict workers’ savings in the form of income can come with significant implementation costs, Mr. Campbell said.

PROPOSED GUIDANCE

Over the past three years, Assistant Labor Secretary Phyllis Borzi and the Treasury Department have been weighing the prospect of coming up with guidelines for lifetime-income options. There was a public hearing on the topic in 2010, eventually leading to a proposed guidance package from the department in 2012.

At the time, it proposed encouraging a partial-annuitization option for participants as an alternative to taking a lump sum or a stream of payments. The Labor Department also sought to permit retirees to use some of their savings to buy longevity insurance or a deferred-income annuity.

Finally, the Treasury Department proposed clarifying rollover regulations to permit the purchase of annuities and to satisfy spousal–protection rules when 401(k) accumulations are used to buy deferred-income annuities.