NEWS RELEASE

July 12, 2007
PR-07/18
For additional information:
Jason Hammersla
202-289-6700

Council urges additional DOL guidance for pension plan providers complying with benefits statement rules

WASHINGTON, D.C. — Douglas O. Kant, senior vice president and deputy general counsel for FMR Corp. and member of the American Benefits Council Board of Directors, testified on behalf of the Council in today’s hearing of the U.S. Department of Labor (DOL) ERISA Advisory Council Working Group on Participant Benefit Statements. The group convened to discuss the expanded benefits statement requirements under the Pension Protection Act of 2007.

"We applaud the positive approach taken by the DOL staff in issuing transitional guidance, which acknowledged the substantial time and expense that would be incurred by service providers — and consequently, plan sponsors and plan participants — in complying with the new requirements," Kant told the panel. "The Department should continue to keep these concerns in mind in the development of final guidance on the topic."

The Council's testimony outlined plan sponsors’ and service providers’ concerns with the regulatory guidance provided so far:

Use of Internet technology in providing benefits statements: "DOL should reaffirm its position regarding Internet access on a permanent basis, since the ultimate beneficiaries of this position are the plan participants, due to timeliness of information, ease of access, and reduced expense," Kant said.

Timing of benefits statements: Currently, statements must be provided within forty-five (45) days after the end of the relevant reporting period. "For smaller recordkeepers, particularly if multiple vendors are involved, that time frame may be difficult to satisfy. DOL should consider a longer period ending with the due date for the plan’s annual return (Form 5500 series) filing," Kant said.

Also, the PPA authorizes the use of estimates under regulations prescribed by the Department. "It is very important that the Department authorize the use of estimates, but there will be employers that do not want to use estimates because of the possibility of confusing participants, which is why the additional time is needed to determine benefits with more precision," Kant added.

Formatting of benefits statements: Thus far, it is the Department’s view that good faith compliance with the Act's periodic statement requirements would not preclude the use of multiple documents or sources for benefit statement information. "We do not believe that the statutory language would compel a different result in permanent guidance," Kant said. "It is important to remember that in each of these cases the information is stored on different reporting systems maintained by different organizations, whether the organizations are affiliated or not. The operational and compliance challenge to combine the information on these different systems would be immense.

Substance of benefits statements: Current guidance provides that statement disclosure need not include limitations imposed by investment vehicles or by applicable securities laws. "This approach is particularly compelling with respect to mutual funds and group trust commingled pools, where such restrictions would be imposed by a third-party manager as a condition of participation," Kant noted. "We also think that it may be most efficient to permit the plan sponsor or service provider to inform participants where and how to access such information when needed, rather than detail every limitation on the statement."

Disclosure of permitted disparity: The Council suggests that DOL confirm that a generic reference (for example, "see your summary plan description") would be sufficient for purposes of this provision under defined benefit plans. "Confirmation that a cross-reference to the summary plan description satisfies the vesting information requirement would also be helpful," Kant noted.

Value of investments in benefits statements: ERISA now states that the periodic statement for an individual account plan shall include the "value of each investment to which assets in the individual account have been allocated." For most investment options offered under a 401(k), 403(b), or other defined contribution plan, this would be the market value of the assets in the fund, or contract value in the case of a stable value fund.

"The answer is not so clear with respect to various types of annuity contracts and life insurance policies purchased under a defined contribution plan," Kant said. "DOL should provide flexibility regarding how such products need be reported on the participant statement, so that plans may use whichever of these values is deemed to be most useful to the plan participant."

Model participant statements: DOL is currently required to publish a model participant statement by August 18, 2007. "We strongly recommend that any model notice published by the Department be furnished purely for educational purposes," Kant said. "We believe that current formats differ substantially from vendor to vendor and between plan sponsors. The sample diversification language published was a good example of helpful guidance."

Kant's testimony is available on the Council Web site. To arrange an interview with Council staff on this issue, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or 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.