Report Of The Working Group On Participant Benefit Statements

The DOL released the Report Of The Working Group On Participant Benefit Statements. The report was produced by the ERISA Advisory Council’s Working Group on Participant Benefits Statements and included the following primary recommendations to the Secretary of Labor for consideration:

Recommendation 1: The Department should provide longer due dates for defined benefit plan benefit statements, dates that recognize the time it takes to accumulate details of participant data necessary to calculate all participants' accrued benefits, and that recognize differences in accumulating data. Further, the Department should provide a means for obtaining relief from the due dates for those defined contribution plans with non-participant directed assets that cause delays in obtaining complete data because of the timing of determination of plan assets, such as contributions and asset valuation, participant compensation, and other matters inherent in the plan.

Recommendation 2: The Department should convene a Task Force of benefit statement stakeholders to develop the content of a model statement. The view of the Working Group is that the content should be minimized, including only that required by the statute. The model statement should be crafted in a way to inspire sponsors to add information and education. In that regard, the Working Group recommends including the application of IB 96-1 to the benefit statement to clearly communicate the boundaries of the information and education that could be included in benefit statements without crossing the "advice" threshold.

Recommendation 3: The Department of Labor should promulgate regulations that preserve the multi-document option for the benefit statement. Further, the Department of Labor should update its regulations regarding electronic communication to a "reasonable access" standard as in the Department of Treasury safe harbor regulation in recognition of the continued advancement in web-based communication and the increase in its use by participants.

The Report included the following sections:

• Executive Summary
• Introduction
• Prior Law and Regulations, New Law, and Initial Guidance
• Scope of the Working Group's Paper and Questions Distributed to Potential Witnesses
• Concerns of the Department of Labor, Participants, Plan Sponsors and Service Providers
• Working Group's Observations, Discussions and Recommendations
• Summaries of the Speakers and Written Testimony
• Additional Information Sources

History of New Rules and Regulations

Prior to the PPA, Prior law under ERISA §105 required the plan administrator to provide, only upon request, benefit statements to participants and beneficiaries; no more than one statement was required during a 12-month period. The information required to be furnished included the total accrued benefits and the total vested accrued benefits (or the earliest date on which benefits would become vested). Under ERISA §209, participants who terminated service with the employer or incurred a one-year break-in-service were required to receive a benefit statement. Prior law made no distinction as to the benefit statement requirements between defined benefit and defined contribution plans.

Under the new rules (as provided by the PPA), effective for plan years beginning in 2007 (with a delayed effective date for collectively bargained plans), automatic benefit statements are now required. The time period and the information furnished on the statements vary depending on the type of plan, including tri-annually for defined benefit plans (except that defined benefit plans may elect an alternative notice provision and continue to make statements available annually upon request), annually for non-participant directed defined contribution plans, and quarterly for participant directed defined contribution plans.

• Pension Protection Act of 2006 (PPA) (Public Law 109–280—Aug. 17, 2006) - charges the DOL with designing model notices for plan sponsors, and authorizes the DOL to issue interim guidance prior to the model notices.
  
• DOL FAB 2006-03 Periodic Pension Benefit Statements - PPA (Dec 20, 2006) - In December 2006, the DOL issued Field Assistance Bulletin No. 2006-03, providing guidance on good faith compliance with the new rules, which included establishing a 45-day day time period for furnishing the required statements.
  
• DOL FAB 2007-03 Periodic Pension Benefit Statements for Non-Participant Directed Individual Account Plans - In Field Assistance Bulletin No. 2007-03, the DOL relaxed the 45-day time period for individual account plans that are not individually directed and provided that the timing for benefit statements for such plans be coordinated with the filing for the plan's Form 5500.

It is expected that the DOL through regulations will specify which plans are covered; the required content for the participant benefit statements; frequency of disclosure, as well as required due dates for compliance and periods of coverage; form of furnishing statements; and mode of delivery.

The Working Group Report was also discussed in DOL Working Group Ideas for Benefit Statements.