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What Do We Need to Tell Our Workers About Their Retirement Plan Now?
April 12, 2007
What Do We Need to Tell Our Workers About Their Retirement Plan Now?
Part One of a Five-Part Series
Beginning in 2007, employers must provide periodic benefit statements to their workers and others who are covered under the company's retirement plan. Statements must include the amount of the participants' total accrued benefit or account balance, the extent to which the participant is vested (or the date the participant will become vested), and, if applicable, an explanation of the plan's Social Security integration or floor-offset provisions. Statements for profit sharing and 401(k) plans must also include the value of each of the investments allocated to the participant's account. The frequency of statement delivery varies by type of plan:
Profit sharing and 401(k) plans that allow participants to choose their investments must issue quarterly statements. The statements must be issued within 45 days following the end of the quarter. The first statements are required by May 15, 2007. These statements also must include an explanation of the plan's limitations or restrictions on the right to direct investments, an explanation of the importance of a diversified and well-balanced investment portfolio, and a notice directing participants to the DOL's website (http://www.dol.gov/ebsa/investing.html) for information on individual investing and diversification.
Trustee-Directed Plans. Profit sharing and 401(k) plans that do not give participants investment choices must provide the statements at least annually.
Collectively-Bargained Plans. Plans that cover only workers covered under collective bargaining agreements generally have until 2008 to begin issuing the new notices to bargaining unit workers.
Defined Benefit Plans. Defined benefit plans must issue the statements at least once every three years.
Model Notices
Companies do not need to create a single notice that provides all of the required information. Rather, the new legal requirements can be satisfied from multiple sources, if participants and beneficiaries are given an advance notice that explains how and when the required information will be furnished or made available. In the future, DOL will supply a model form to use in meeting the new legal requirements. Until it does so, plans must ensure that they are in good faith compliance with the requirements, or risk penalties of up to $110 per day.
Delivery
Benefit statements may be distributed in written, electronic, or other forms, provided that the form is reasonably accessible to participants and beneficiaries. Providing continuous access to plan/account information through one or more secure websites will be considered good faith compliance with the benefit statement requirements, provided that participants and beneficiaries are furnished with an explanation of the availability of the information and how such information can be accessed.
If you have questions, please contact:
Barry Berman & John Paliga
(410) 752-2468
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