Retired Actuaries Submit Comments to the Department of Labor Regarding Disclosure of Lifetime Income Stream Equivalents

Here are our comments to the Department of Labor regarding disclosure of Lifetime Income Stream Equivalent (LISE) amounts in defined contribution plan benefit statements. In summary, we made the following recommendations:

1. The DOL Lifetime Income Calculator located on the DOL website should be modified so that LISE calculations using prescribed (or default) assumptions may be performed by plan sponsors or their plan administrators using the calculator.
2. The DOL Lifetime Income Calculator should allow input of alternative assumptions, retirement ages, participant data, etc. to further facilitate retirement planning by participants,
3. LISE’s should be expressed in today’s dollars and anticipate inflation-indexing of payments, and
4. The model disclosure language should direct participants to the DOL Lifetime Income Calculator to enable them to model different assumptions, different retirement ages, future contributions, etc.

For illustration purposes, we referred the DOL to our Actuarial Lifetime Retirement Income Estimator (ALRIE) as an example of a website tool that uses default assumptions to convert current and projected accumulated savings into real dollar lifetime income equivalent streams, but also permits input of alternative (override) assumptions. Finally, we included sample model disclosure language consistent with our understanding of the new law and our recommendations.