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Periodic Benefit Statements for Participants and Beneficiaries
Under the ERISA disclosure rules, as revised by the Pension Protection Act, a plan administrator must provide a pension benefit statement to participants and beneficiaries on a regular, recurring basis.
Requirements for quarterly statements for defined contribution plan participants with the right to direct investment of account assets
A plan administrator of a defined contribution plan (other than a one-participant retirement plan) must furnish a benefit statement at least once each calendar quarter to each participant or beneficiary who has the right to direct the investment of assets in his or her account under the plan. A benefit statement must also be furnished, upon written request, to a beneficiary who does not have the right to direct investment of his or her account assets.
Requirements for annual statements for defined contribution plan participants without the right to direct investment of account assets
A plan administrator of a defined contribution plan (other than a one-participant retirement plan) must furnish a benefit statement at least once each calendar year to a participant or beneficiary who has his or her own account under the plan but does not have the right to direct the investment of the assets of the account. A benefit statement must also be furnished, upon written request, to a beneficiary who does not have his or her own account under the plan.
Requirements for triennial statements for defined benefit plan participants
A plan administrator of a defined benefit plan must provide a pension benefit statement at least once every three years to each participant with a nonforfeitable accrued benefit and who is employed by the employer at the time the statement is furnished and to a participant or beneficiary of the plan upon written request. The information furnished may be based on reasonable estimates determined under regulations prescribed by the Secretary of Labor, in consultation with the PBGC.
The Secretary of Labor may provide that the years during which no employee or former employee receives any benefits under the plan need not be taken into account when determining the three-year period for when to provide the pension benefit statement.
Content of benefit statement
A benefit statement must indicate, on the basis of the latest information available, the total benefits accrued and the nonforfeitable benefits, if any, that have accrued or the earliest date on which benefits will become nonforfeitable. The statement must be written in a manner calculated to be understood by the average plan participant. It may be delivered in written, electronic, or other appropriate form to the extent that the form is reasonably accessible to the participant or beneficiary.
The pension benefit statements must contain the following information:
· For all defined contribution participants and beneficiaries, the value of each investment to which assets in a participant's or beneficiary's account have been allocated, determined as of the most recent valuation date under the plan. The value must include any assets held in the form of employer securities, without regard to whether the securities were contributed by the plan sponsor or acquired at the direction of the plan or the participant or beneficiary.
· For participants and beneficiaries who have the right to direct investments, information regarding any restrictions on the right to direct investments, the importance of diversification, a statement of the risk of investing more than 20% of participants' portfolios in the security of a single company and a notice directing the participants and beneficiaries to a DOL website for more information on individual investing and diversification;
· For participants and beneficiaries who have the right to direct investments, the value of each investment to which assets have been allocated, including assets held in employer securities;
· An explanation of permitted disparity (integration with Social Security) or a floor-offset arrangement, if the plan provides for such a plan design;
· On the basis of the latest available information, the total account balance and vesting information.
· For participants and beneficiaries who have the right to direct investments, directions to the Internet website of the Department of Labor for information sources on individual investing and diversification.
Alternatives to Annual Benefit Statements
(a) For defined contribution plan participants without the right to direct investment of account assets.
The requirements that a benefit statement be provided annually to a participant or beneficiary who has a defined contribution plan account will be met if, at least annually, the plan updates the information that is required to be provided in the benefit statement, or provides in a separate statement, information that will enable a participant or beneficiary to determine their nonforfeitable vested benefits.
(b) For Defined Benefit Plan Participants.
For a defined benefit plan, the annual benefit statement requirements will be treated as met if at least once a year the plan administrator provides to participants notice of availability of the pension benefit statement and the ways in which the participant may be obtain the statement. The notice may be delivered in written, electronic or other appropriate form to the extent the form used is reasonably accessible to the participants .
Dates for furnishing statements
Pending the issuance of further guidance, it is the EBSA's view that the furnishing of pension benefit statement information to individual account plan participants or beneficiaries not later than 45 days following the end of the calendar-quarter period for plans that provide participants the right to direct their investments will constitute good faith compliance.
Plan administrators of non-participant directed individual account plans will, pending issuance of further guidance, be deemed to be in good faith compliance with the governing ERISA requirements if benefit statements are furnished to participants and beneficiaries on or before the date the Form 5500 Annual Return/Report is filed (but not later than the last date on which the plan administrator is required to file the report, including any extensions) for the plan year to which the statement relates.
In an additional clarification, EBSA states that individual account plans that do not permit participant direction will not become subject to the quarterly statement requirement merely because the plan permits participants to take loans from the plan.
Good faith compliance
(a) Content
Until model pension benefit statements are issued the EBSA has provided guidance in EBSA Field Assistance Bulletin (FAB) 2006-03, issued December 20, 2006, and FAB No. 2007-03, issued October 12, 2007, on what constitutes a reasonable good-faith interpretation of the new pension benefit statement requirements for use by plan sponsors.
(b) Timing
In guidance on what constitutes a reasonable good-faith interpretation of the new pension benefit statement requirements, the EBSA explains that the first pension benefit statement would be due for the 2009 plan year for defined benefit plans that do not choose to comply with the alternative notice requirements. If a defined benefit plan elected to take advantage of the alternative notice provision in ERISA Sec. 105(a)(3)(A), the statement must have been furnished not later than December 31, 2007.
Miscellaneous Information
(1) Limits or restrictions on right to direct investments.
Regarding the requirement that individual account plans with participant investment direction include an explanation of the limitations on the right to direct investments, it is the EBSA's view that this refers only to limitations under the plans, not other limitations which may exist due to securities laws or the rules of investment funds.
(2) Multiple documents
For defined contribution plans that provide for participant direction, the information required for inclusion in benefit statements may come from multiple sources. The EBSA states that compliance does not preclude the use of multiple documents or sources for benefit statement information, provided that participants and beneficiaries are timely furnished with a notification that explains how and when the required information will be furnished or made available. This notification should be written in a manner calculated to be understood by the average plan participant, furnished in any manner that a pension benefit statement can be furnished, and provided in advance of the date on which a plan is required to furnish the first pension benefit statement.
(3) Electronic access
Under ERISA, electronic access is a permissible method of providing pension benefit statements to participants and beneficiaries. Pending the issuance of further guidance, the EBSA will view compliance with either ERISA Reg. §2520.104b-1(c) or IRS Reg. §1.401(a)-21 as good faith compliance with the requirements of the amended ERISA Sec. 105 The EBSA will also view the provision of continuous access to benefit statement information through secure web sites as good faith compliance, as long as participants and beneficiaries have been notified how to access the information, and notified of their right to obtain a paper copy of the same information. This notification should be written in a manner calculated to be understood by the average plan participant, furnished in any manner that a pension benefit statement can be furnished, and provided both in advance of the date on which an individual account plan is required to furnish the first pension benefit statement and annually thereafter.
(4) Notification of diversification rights.
For individual account plans that, prior to January 1, 2007, provided participants and beneficiaries diversification rights at least equal to the new rights conferred under ERISA Sec. 204(j), the EBSA believes that the furnishing of the notice of the right to divest investments in employer securities under ERISA Sec. 101(m) as a stand-alone disclosure may result both in confusion to participants and beneficiaries and distribution costs that, in many instances, will be passed on to the plan's participants and beneficiaries. In view of the fact that the periodic pension benefit statement required to be furnished each calendar quarter under ERISA Sec. 105(a)(1)(A)(i) is required to contain information similar to that required by ERISA Sec. 101(m)(2) concerning the importance of maintaining a diversified portfolio, and the fact that the pension benefit statement required to be furnished each calendar quarter must be delivered within a few months of the furnishing of the ERISA Sec. 101(m) notice, the EBSA will treat a plan administrator's compliance with the periodic benefit statement requirements of ERISA Sec. 105(a)(1)(A)(i) as satisfying the notice requirements of ERISA Sec. 101(m) if, prior to January 1, 2007, the individual account plan provided participants and beneficiaries diversification rights at least equal to the new rights conferred under ERISA Sec. 204(j).
(5) Explanation of diversified investments.
To assist in compliance with the ERISA Sec. 105 requirement that plans provide participants with an explanation of the importance of a well-balanced and diversified investment portfolio for retirement security, the EBSA provides model language. In addition, the EBSA has supplied plan administrators a website to include in the pension benefit statement that will provide participants and beneficiaries sources of information on individual investing and diversification. It is www.dol.gov/ebsa/investing.html.
(6) One statement in a 12-month period.
No more than one statement need be provided to a participant or beneficiary in a defined contribution plan or defined benefit plan who requests a pension benefit statement in writing during any 12-month period.
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