ERISA Advisory Council Publishes Recommendations on Certain Retirement Plan Disclosures: 

The ERISA Advisory Council (the “Council”), which was established under section 512 of ERISA to advise the Secretary of Labor on matters relating to welfare plans and pension benefit plans, recently released a report titled “Mandated Disclosure for Retirement Plans – Enhancing Effectiveness for Participants and Sponsors” (the “Report”). Most plan sponsors would agree that with the proliferation of required disclosures to participants and beneficiaries over approximately the past fifteen years, simplification in this area would be welcome. In that vein, the Report states that the Council examined “how to streamline the content and to make the delivery and availability of [three] mandatory retirement disclosures more practical and effective.”

Here is a list of the three disclosures addressed in the Report, as well as a summary of the Report’s related recommendations to the Department of Labor (the “DOL”):

  • Summary Plan Description (“SPD”):  The SPD is intended to provide accessible and reliable information to participants regarding their plan’s provisions. The Report recommends that the DOL provide plan sponsors with the option to comply with the SPD requirement by annually distributing a “Quick Reference Guide,” which would consist of the SPD’s introductory portion. However, the Report does not propose to eliminate either of the following: (1) the requirement to update the full SPD in a timely manner; or (2) the requirement to provide the full SPD upon a participant’s initial eligibility and upon a participant’s or beneficiary’s request.
  • Single Employer Annual Funding Notice (“AFN”):  The AFN, which replaced the Summary Annual Report disclosure requirement for defined benefit plans, provides technical information about a defined benefit plan’s funded status. The Report states that the DOL should simplify the model AFN so that it provides basic introductory information regarding the plan’s funded status and key metrics, with all other information contained in an appendix to the AFN.
  • Summary Annual Report (“SAR”):  The SAR provides a summary of certain information contained on a plan’s annual Form 5500 filing, as well as details about how to request additional information. The Report recommends that instead of providing the SAR, the DOL could allow plans to notify participants about the availability of the plan’s annual Form 5500, along with  instructions for how to access that form. Such alternative disclosure could be provided as a stand-alone notification or included as a part of other mandatory disclosures (e.g., the above-referenced “Quick Reference Guide” in an SPD).

The Report also states that “it was determined that any recommendation to update and/or replace the ERISA §404(a)(5) [participant fee] disclosure requirements was premature and the 2017 Council encourages a future Council to conduct a more thorough review of the topic and the effectiveness of fee disclosures in general, including ERISA §404(a)(5).”

Although the Report is limited to the above-referenced three ERISA disclosures, it notes that “the Council believes that the principles used to improve the disclosures mentioned above could be applied to other current and future mandated disclosures…” with a main goal being “to make retirement disclosures more understandable and useful for participants.” It will be interesting to see if the DOL adopts the Report’s recommendations, if a future Council investigates simplifying the ERISA §404(a)(5) [participant fee] disclosure, and if the IRS formally considers simplifying the content of its retirement plan disclosures (e.g., the safe harbor notice).

You can access the full Report here: