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NEWS RELEASE
September 18, 2007
Council addresses DOL panel, applauds continued ‘good faith standard’ regarding benefits statementsWASHINGTON, D.C. — Kyle Brown, reitrement counsel for Watson Wyatt Worldwide 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. Brown focused his comments on Section 508 of the Pension Protection Act of 2006 (PPA), which imposes new reporting requirements on retirement plans. “The Council applauds the Department of Labor’s attention to the important issues surrounding the implementation of the new pension benefit statement requirements,” Brown told the panel. He also voiced the Council’s appreciation for the issuance of transitional guidance, particularly the provision allowing for good faith compliance by plans with respect to the PPA requirements. “Given the ongoing uncertainty surrounding the nature and scope of a plan’s participant benefit statement obligations ... the Council believes that the good faith standard should be preserved unless and until future clarifying guidance is issued.” The Council’s testimony outlined plan sponsors’ and service providers’ concerns with the regulatory guidance provided so far: Use of electronic delivery in providing benefits statements: The Council is pleased that the transitional guidance allows benefits statements to be delivered in accordance with the current DOL electronic delivery rules or the electronic delivery rules under Treasury Department regulations. “Employers, plan administrators and participants collectively are best served by electronic communications, which are more effective, less expensive, and consistent with the increasing technological skills and usage rates of American workers,” Brown said. “We ask that future guidance make clear that a plan administrator may use electronic media to deliver benefit statements to those participants and/or beneficiaries with effective access to such media. Required content of benefits statements: Section 508 of the PPA includes simple content requirements; this simplicity should not be overlooked. “Keeping the focus of benefit statements on the core information of the benefits provided by the plan, and not over-complicating the statements would go a long way towards the goal of improving participants’ understanding of their benefits in these plans and would simplify administrative requirements in producing such statements,” Brown said. Additional information, such as a plan’s use of permitted disparity or floor offset arrangements or the plan’s vesting schedule, can be meaningfully provided through a cross-reference to the plan’s Summary Plan Description. “Requiring a plan to restate the full benefit formula in the benefit statement in addition to the SPD serves no apparent purpose,” Brown said. “And the express statutory language of the PPA clearly supports the use of a cross-reference with respecting to the plan’s vesting schedule.” Timing of benefits statements: The Council’s testimony requests that DOL issue final guidance providing that a plan administrator is not obligated to deliver to participants and beneficiaries a benefit statement for the applicable plan year until the due date, including extensions, for the filing of the plan’s Form 5500. “In many instances, compiling the necessary information to calculate individual participant benefit statements requires that employers aggregate payroll and service data from across business lines, controlled group entities, divergent or incompatible payroll systems, etc., and can involve several months of intensive work,” Brown said. “There will also be many instances where it is not cost effective to develop precise statements for every participant every three years,” Brown said, “So it is also critical that the Department’s regulations permit reasonable estimates, as provided for in the statute. Even these estimates would require significant work in order to make them reasonably accurate, so the deadline should not be accelerated where estimates are used.” Model participant statements: DOL was expected to issue model statements by August 17, 2007, for use by plan sponsors, and the Council urges their expedient release. “To the extent practicable, we request that the model benefit statements include a list of required content in addition to specific model language ... and address hybrid plans,” Brown said. “The Council’s position on benefits statements is consistent with the objectives of Safe and Sound, the Council’s ten-year strategic plan for promoting personal financial security,” said Lynn Dudley, Council vice president, retirement policy. “For both defined benefit pension plans and defined contribution programs like 401(k) plans, we must make sure that benefits statements are useful and meaningful and that participants have the financial literacy to understand them.” To arrange an interview with Brown, Dudley or other Council staff, 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.
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