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CCH® PENSION AND BENEFITS — 1/4/07

EBSA provides guidance on periodic pension benefit statements

The Employee Benefits Security Administration (EBSA) has issued guidance implementing the periodic pension benefit statement requirements enacted by the Pension Protection Act of 2006 (PPA; P.L. 109-280).

Under ERISA §105, plan administrators have been required to furnish plan participants and beneficiaries, upon request, with statements showing total benefits accrued and vested. Sec. 508(a) of the PPA amended ERISA §105 to establish, generally for plan years beginning after December 31, 2006, an affirmative obligation to automatically furnish pension benefit statements periodically, and to increase the amount of information required in such statements.

Until new regulations and model pension benefit statements can be issued reflecting the changes to ERISA §105, a Field Assistance Bulletin has been issued for use by plan sponsors, service providers and others, which provides EBSA's view of what constitutes a reasonable good-faith interpretation of the new requirements.

Electronic access

Under ERISA §105(a)(2)(A)(iv), electronic access is a permissible method of providing pension benefit statements to participants and beneficiaries. Pending the issuance of further guidance, 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 §105. 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.

Explanation of diversified investments

To assist in compliance with the ERISA §105 requirement that plans provide participants with an explanation of the importance of a well-balanced and diversified investment portfolio for retirement security, the Field Assistance Bulletin provides model language.

Multiple documents

Since the information required for inclusion in pension benefit statements may come from multiple sources, EBSA states, 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.

Time period for furnishing statements

Under amended ERISA §105, pension benefit statements for individual account plans must be issued at least quarterly, if the participants are allowed to direct their investments, or at least yearly for such plans that do not permit participant direction. Statements for defined benefit plans must be issued at least once every three years. Pending the issuance of further guidance, it is EBSA's view that the furnishing of pension benefit statement information not later than 45 days following the end of the calendar quarter or calendar year period will constitute good faith compliance.

In 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.

Finally, regarding the ERISA §105 requirement that individual account plans with participant investment direction include an explanation of the limitations on the right to direct investments, it is 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.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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