“On its surface this requirement seems like a good idea and for the most part it is. Nothing is more important than knowing what your retirement savings can produce as a stream of income. The problem is that it creates yet another administrative burden on plan sponsors. However, the larger concern is the assumptions that may be prescribed by government.
The value of such a statement depends on those assumptions and if they are unrealistic for a given situation they will produce very misleading information. A better approach is to provide basic assumptions, but to allow the participant to modify them such as changing the assumed interest rate or life expectancy assumption. In addition, any annuity projection requirement should include a joint and survivor option.
Anyone can get a good idea of what their account balance will produce as an annuity in the commercial market by using one of many online annuity calculators. For example, https://www.immediateannuities.com
Such a site tells me that with $500,000 I could buy an immediate annuity at age 65 producing $2,750 per month for life (there will be some variation among insurers).
“Legislation introduced recently in both the U.S. House of Representatives and the Senate would require retirement plans to include an “annuity equivalent” on participant statements.
In the House, Reps. Luke Messer (R-Ind.) and Mark Pocan (D-Wisc.) introduced the Lifetime Income Disclosure Act (H.R. 2317), which would require that on each participant statement, the individual’s current retirement balance must be illustrated as if they were receiving a monthly paycheck for life (based on assumptions specified in rules prescribed by the Secretary of Labor).
Sens. Johnny Isakson (R-Ga.) and Chris Murphy (D-Conn.) introduced a companion bill, the Lifetime Income Disclosure Act (S. 1317) in the Senate. Isakson previously introduced the legislation in the 111th and 112th Congresses.
Original cosponsors of the Lifetime Income Disclosure Act in the House include Reps. Jared Polis (D-Col.), Dave Reichert (R-Wash.) and Ron Kind (D-Wisc.)
The American Retirement Association supported the legislation, along with American Council of Life Insurers, Insured Retirement Institute, MassMutual, Pension Rights Center, Prudential, TIAA-CREF and Women’s Institute for a Secure Retirement.”