The Department of Labor's Employee Benefits Security Administration
is providing general temporary guidance concerning “good faith
compliance” with the pension benefit statement provisions of the
Pension Protection Act of 2006, according to Field Assistance Bulletin
No. 2006-03, obtained by BNA Dec. 20.
“The department has not yet issued regulations or other
guidance concerning compliance with the pension benefit statement
provisions of Section 105 of the Employee Retirement Income Security
Act, as amended by Section 508(a) of the Pension Protection
Act,” the bulletin said.
The bulletin said plan administrators would be treated as
satisfying Section 105 if they acted “in good faith with a
reasonable interpretation” of the section's requirements, and
clarified the department's thinking on those requirements.
Thomas G. Schendt, a partner in the Washington office of Alston
& Bird, told BNA Dec. 20 the bulletin is ”timely and
thoughtful advice,” is a “recognition of the realities of
how retirement plans are operated,” provides “open-minded
and practical interpretation to the language of the PPA,” and
provides “model language.”
The bulletin “provides some helpful temporary relief
regarding employee benefit plan statement requirements,” David
C. Kaleda, an Alston & Bird associate, told BNA Dec. 20.
The bulletin provides the general guidance in a question-and-answer
format addressing eight issues including form, manner, and dates for
furnishing statements, rights and limitations to direct investments,
investment principles, notification of diversification rights, and
department Web site reference.
Concerns Expressed.
Since the enactment of the PPA, representatives of plan sponsors,
service providers and others in the employee benefits community have
raised a number of interpretive and compliance issues concerning the
new pension benefit statement provisions, the bulletin said.
In particular, concerns have been expressed about the imminent
effective date, the absence of guidance, and the cost and burdens
attendant to pension benefit statement compliance efforts prior to the
adoption of pension benefit statement regulations and the issuance of
model pension benefit statements by the department, the bulletin
said.
Among other things, ERISA Section 105 requires plans to give
automatic benefit statements to self-directed individual account plans
at least quarterly and to other individual account plans annually.
Benefit statements to defined benefit plans must be provided at least
once every three years, the bulletin said.
More information must be contained in pension benefit statements
for both individual account and defined benefit plans, the bulletin
said.
The amendments to Section 105 are generally applicable to plan
years beginning after Dec. 31, 2006, with special rules for plans
maintained pursuant to collective bargaining agreements, it said.
Section 508(b) of the PPA requires the department to develop one or
more model pension benefit statements within one year of the date of
enactment of the PPA, which is August 18, 2007, it
said.
Q&A General Guidance.
The bulletin provided general guidance for the following:
• Form
of Furnishing Statements.The use of multiple documents or sources
for benefit statement information are not precluded, provided that
participants and beneficiaries have been notified with an explanation
of how and when the required information will be furnished or made
available to participants and beneficiaries. Such notification should
be written in a manner calculated to be understood by the average plan
participant.
• Manner
of Furnishing Statements.Among other things, pension plans may
provide participants continuous access to benefit statement
information through one or more secure Web sites, provided that
participants and beneficiaries have been notified with an explanation
of the availability of the required pension benefit statement
information and how such information can be accessed by participants
and beneficiaries.
• Dates
For Furnishing Statements.The pension benefit statement
information should be provided not later than 45 days following the
end of the period (calendar quarter or calendar year), under Section
105(a)(1)(A)(i) and (ii).
• Rights
to Direct Investments.A reasonable interpretation of Section
105(a)(1)(A)(i) would be that a participant loan feature does not,
standing alone, cause a plan to be self-directed (a plan that provides
participants the right to direct the investment of assets in their
accounts).
• Limitations
or Restrictions on Right to Direct Investments.A reasonable
interpretation of Section 105(a)(2)(B)(ii)(I) would be that benefits
statements must include limitations and restrictions on participants'
or beneficiaries' rights imposed “under the plan,” but
need not include limitations and restrictions imposed by investment
funds, other investment vehicles, or by state or federal securities
laws.
• Investment
Principles.To comply with Section 105(a)(2)(B)(ii)(II) careful
consideration should be given to the benefits of a well-balanced and
diversified investment portfolio, including any retirement savings
outside of the plan. It also is important to periodically review the
investment portfolio, the investment objectives, and the investment
options under the plan to help ensure that retirement savings will
meet retirement goals.
• Notification
of Diversification Rights.The information required to be disclosed
to participants and beneficiaries under Section 101(m) is most
significant for participants and beneficiaries acquiring new
diversification rights under Section 204(j). Participants and
beneficiaries in plans conferring new diversification rights as of
Jan. 1, 2007, should be furnished information concerning such rights
and the importance of maintaining a diversified portfolio as soon as
possible following Jan. 1, 2007.
By Michael W. Wyand
For purposes of Section 105(a)(2)(B)(ii)(III), on DOL
information on investments and diversification, plan administrators
may use the following Internet address for pension benefit statements:
http://www.dol.gov/ebsa/investing.html
The full text of the FAB can be found at http://www.dol.gov/ebsa/regs/fab_2006-3.html