January 4, 2007

DOL Offers Guidance on Benefit Statement Distribution

The Pension Protection Act (PPA) requires that plans provide benefit statements on a more regular basis than previously required (see Notice Requirements from the September, 2006 edition of the Benefit Beat).  Specifically, defined contribution plans must provide benefit statements quarterly, as long as the plan allows individual direction.  Defined contribution plans that do not allow individual direction must provide benefit statements annually. Defined benefit plans must provide benefit statements every three years, unless the plan elects to comply with an alternative notice requirement. 

On December 20, 2006, EBSA, the arm of the Department of Labor that regulates employee benefits, issued Field Assistance Bulletin (FAB) 2006-3, that can be relied upon until regulations are issued.  According to this FAB, plans have up to 45 days following the end of the period (calendar quarter or calendar year) to furnish the pension benefit statements. 

The statements may be provided electronically, as long as the electronic distribution complies with the DOL and Treasury electronic distribution requirements (see Disclosure through Electronic Media in the For Your Benefit book, and More Guidance Relating to Electronic Notices and Elections from the 11/1/06 edition of the Benefit Beat).  Furthermore, this guidance provides that the benefit statements can be provided in the form of multiple documents from multiple sources, as long as the plan provides an umbrella document explaining where the information will be coming from. 

One of the requirements of the PPA is that the notice must direct participants to the DOL for any questions relating to individual investing and diversification.  The FAB includes:

  • Model explanatory language that can be used in benefit statements relating to the importance of long-term retirement security and a well-balanced, diversified investment portfolio.
  • A DOL website that can be used to refer participants and beneficiaries for sources of information relating to individual investing and diversification: www.dol.gov/ebsa/investing.html.

This FAB also provides some relief for plans subject to the employer securities diversification requirements (see December 2006 edition of the At Issue).  Specifically, if a plan had allowed for diversification of employer securities prior to January 1, 2007, at least as favorable as the diversification requirements contained in the PPA, then the plan would be exempt from the diversification notice requirements (described in the At Issue) until the first quarterly statement is due.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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