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NEWS RELEASE
August 9, 2006
Council testifies before DOL ERISA Advisory Council:Defined contribution fiduciary compliance rules need to be updated for new technologiesWASHINGTON, D.C. — “Issued before the Internet and e-mail, the final ERISA 404(c) regulations are an important part of fiduciary compliance in defined contribution plans – but they need to be updated,” testified Jason Bortz today before the Department of Labor’s (DOL’s) ERISA Advisory Council Working Group on Select Issues of a Procedurally Prudent Investment Process. “Moreover, far too few plans can satisfy the many procedural requirements of these rules. The time is ripe to see if the 404(c) safe harbor can be made more attractive to plan fiduciaries and more effective in helping plan participants to manage their accounts,” he continued. Bortz, a partner with Davis & Harman LLP, spoke on behalf of the American Benefits Council at the hearing. His statement outlined four proposed areas of improvement in the regulations, specifically: improving the information disclosure requirements, enhancing electronic delivery of required disclosures, applying the soon-to-be-enacted pension reform legislation’s new investment mapping rules, and clarifying ERISA’s fiduciary rules for open brokerage windows offered under defined contribution plans. “Participants need useful information about their defined contribution plan investment options,” Bortz said. “To effectively control their accounts, participants need access to key information without being overwhelmed into decision-making paralysis. Instead of the currently required prospectus for each investment option, a simple two- to three-page summary of key information that includes access to the full prospectus is appropriate.” Bortz also said the impending enactment of Pension Protection Act (H.R. 4) raises two related issues: when a plan is “mapping” like investment options during a replacement of funds and how plan fiduciaries can ensure their determinations of similar funds. “We recommend creating a 404(c) safe harbor couple with a flexible general rule that covers a mapping change between funds found to be similar. This guidance should also include the placement of assets in a plan’s default investment if a similar fund is not adopted when a current option is eliminated. A safe harbor coupled with a general rule should provide certainty for some investments and the necessary flexibility for other.” A copy of Jason Bortz’s full testimony is available on the Council’s web site. Council staff is available to comment further upon these issues. To arrange an interview, please contact Deanna Johnson, APR, Council director, communications, at djohnson@abcstaff.org or Jason Hammersla, Council manager, communications & publications, at jhammersla@abcstaff.org. Both can be reached by phone at (202) 289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council’s members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.
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