Benefits & ERISA Law

DOL Working Group Ideas for Benefit Statements

By Suzanne Wynn

The ERISA Advisory Council’s Working Group on Participant Benefit Statements has delivered it’s report to the Dept. of Labor. This working group was formed to study the Pension Protecion Act’s requirement that benefits statements are furnished to plan participants in defined benefit and defined contribution plans. The group was also given the task of making recommendations regarding the content, form and timing of the benefit statements.

It was Section 508 of PPA which contained the benefit statement requirement. Within Section 508(b), it provided that the Secretary of Labor would develop 1 or more model benefit statements within one year after PPA was enacted, and that those model benefit statements would be written in a manner calculated to be understood by the average plan participant and could be used by plan administrators to comply with the requirements of Section 105 of ERISA. When PPA was enacted on August 17, 2006, the expectation was that the model benefit statements would become available for use no later than August 16, 2007. This did not happen. The DOL has released Field Advisory Bulletin 2006-03 and Field Advisory Bulletin 2007-03 on benefit statements but has not released model benefit statements. The working group, in the report, states that they considered whether to develop a model statement as part of their recommendation, but decided not to because they believed it was beyond the scope of their undertaking.

They did make these recommendations regarding the content, form, and timing of benefit statements:

1. The DOL should convene a task force to develop the content of a model benefit statement. The working group recommended including theh application of IB 96-1 to the benefit statement to clearly communicate the boundaries of information and education which could be included in benefit statements without crossing the “advice” threshold;

2. The DOL should consider establishing a transition period for the content requirements because a substantial number of sponsors do not currently have the data necessary to calculate the accrued and vested benefit information;

3. The assumptions and uncertainties associated with any projection of benefits should be included in the statement;

4. The multi-statement option provided for in Field Advisory Bulletin 2006-3 should be continued in the regulations;

5. The DOL should issue regulations for electronic benefit statements which incorporates the DOL’s safe harbor rules and IRS rules regarding electronic notices;

6. The DOL should review the use of electronic communications for benefit statements and issue regulations appropriate for technology currently in use and participants’ access to it;

7. The DOL should provide longer due dates for defined benefit plan statements which recognize the time it takes to accumulate the information necessary to calculate all participants’ accrued benefits. The DOL 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; and

8. The DOL should consider delaying the due date for the initial benefit statement for those defined benefit plans whose provisions do not require the contemporaneous accumulatioin of individual participant dataa to provide them a cost-appropriate period to accumulate the data.

With the working group recommending that the DOL continue to study some of these issues, it is not clear when the model benefit statements might be forthcoming.

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Full post as published by Pension Protection Act Blog on May 13, 2008 (boomark / email).