U.S. Senators Jeff Bingaman (D-New Mexico), Johnny Isakson (R-Georgia), and Herb Kohl (D-Wisconsin) have introduced legislation that would require defined contribution plan sponsors to inform plan participants of the projected monthly income they could expect at retirement based on their current account balance.

Specifically, according to a press release, under the Lifetime Income Disclosure Act, defined contribution plans subject to the Employee Retirement Income Security Act (ERISA) would be required annually to inform participants of how the account balance would translate into guaranteed monthly payments based on age at retirement and other factors. To ensure there is no material burden or potential liability on employers who voluntarily sponsor 401 (k) plans, the legislation directs the Department of Labor to issue tables that employers may use in calculating an annuity equivalent, as well as a model disclosure.

Employers and service providers using the model disclosure and following the prescribed assumptions and DOL rules would be insulated from liability.

According to the announcement, the measure is patterned on the Social Security Administration’s annual statements, which are mailed annually to working Americans to inform them of estimated monthly benefits based on their current earnings. “By providing similar information for 401(k) plans, the Lifetime Income Disclosure Act would give American workers a more complete snapshot of their projected income in retirement,” the announcement said.

The press release included statements backing the legislation from the AARP, the Women’s Institute for a Secure Retirement, and the Retirement Security Project.

“Including a disclosure of how much monthly income a worker can expect from 401(k) savings will encourage younger workers to save more for retirement, and older ones to convert their savings into annuity-like products so that they won’t outlive their savings. The Act will build greater retirement security for everyone at virtually no cost to the taxpayers, employers, or workers,” said David John, senior research fellow at the Heritage Foundation and principal of the Retirement Security Project, in the news release.

Some financial firms are in support of better disclosure of retirement income to participants and have already moved to supply projected retirement income on account statements. Prudential Retirement said today that its defined contribution statements already provide plan participants with a snapshot of their projected retirement income. “The Lifetime Income Disclosure Act would go a long way to putting Americans on a more secure path to retirement,” said Christine Marcks, president of Prudential Retirement. “We believe that providing greater clarity around projected income in retirement will help Americans better understand the need for increased savings to achieve their retirement goals.”

The proposed legislation is here.