The Pension Protection Act (PPA) provision requiring periodic benefit statements has generated more questions and concerns than any other PPA provision. In response to the many questions, the DOL has issued Field Assistance Bulletin 2006-03 (“FAB”). The following questions and answers summarize the key points of the FAB.

When is the new benefit statement requirement effective?
The requirement is effective for plan years beginning after December 31, 2006, with a special rule for collectively bargained plans.

Before regulations are issued, how will the DOL judge compliance?
Until the DOL issues regulations, the DOL will treat a plan administrator as satisfying the benefit statement requirement if the administrator acts in good faith with a reasonable interpretation of the requirement. The FAB provides the DOL’s views on what constitutes good faith compliance with respect to the new requirement.

May the plan administrator use multiple documents or sources to comply with the new information requirement?
Yes. Since many plans have multiple service providers, a plan administrator, pending further guidance, may comply with the information requirement by providing the information from more than one source and on more than one document. For example, the financial institution holding the plan assets may provide the investment information while the third party administrator may provide the vesting information. If the plan administrator uses the multiple document/source approach, the administrator must provide a notice to participants and beneficiaries, in advance of the first benefit statement, explaining how and when the administrator will provide the information.

In what form may the administrator deliver benefit statements?
A plan administrator may deliver the statements in “written, electronic or other appropriate form, as long as such form is reasonably accessible to the participant or beneficiary.” The administrator also may provide the statements on a continuous basis through a secure Web site. If the plan administrator provides the statement by way of a Web site, the DOL requires the administrator to provide a notice to participants and beneficiaries in advance of the deadline for providing the first benefit statement, and annually thereafter, that explains the availability of the statement and how participants and beneficiaries access such information. The notice also must apprise participants and beneficiaries of their right to request and obtain, free of charge, a paper version of the statement.

What requirements apply to a plan that delivers the statements electronically?
The DOL will treat a plan that complies with the DOL safe harbor for electronic delivery (DOL Reg. §2520.104b-1(c)) or the new IRS regulation on electronic delivery (Treas. Reg. §1.401(a)-21) as good faith compliance.

• The DOL safe harbor generally permits a plan to provide documents to a participant electronically if: (1) the participant can access the document where he/she works and use of the system is an integral part of his/her duties; (2) the plan designs the delivery to result in actual receipt of transmitted information (e.g., return-receipt); (3) the plan protects the confidentiality of the participant’s personal information; and (4) the participant is able to obtain a paper version upon request and at no charge.
• The IRS regulations generally provide that a plan may provide a notice electronically if: (1) the participant consents to electronic delivery after receiving a disclosure statement; or (2) the participant is effectively able to access the electronic medium used to provide the notice. The plan also must notify the participant that a paper version is available at no charge.

What is the deadline for providing a benefit statement?
Pending issuance of further guidance, the DOL will consider a plan as providing the statement timely if the administrator provides the statement not later than 45 days following the applicable time period. The applicable time period is the period for which the statement is required. For example, for a participant-directed calendar year plan, the applicable time period is each calendar quarter. The plan administrator would not need to provide the first statement until May 15, 2007 (45 days following the quarter ending March 31, 2007). For a participant-directed fiscal year plan with a June 30 plan year, the administrator would need to provide the statement no later than November 14, 2007 (45 days following the quarter ending September 30, 2007, the first applicable time period). For a non-participant-directed calendar year plan, the deadline for the 2007 calendar year applicable time period would be February 14, 2008. For a calendar year defined benefit plan, the deadline for the first statement would be February 14, 2010. A defined benefit plan also may satisfy the benefit statement requirement by providing an annual notice of the availability of the statement and the way in which a participant may obtain the statement.

Note: The guidance appears to eliminate the requirement that a plan provide a statement during the applicable time period. Instead, the guidance seems to require that a plan provide a statement for the applicable time period, no later than 45 days thereafter. Although a statement generally will provide information for the applicable time period (e.g., plan year quarter), the provision does not impose such a requirement or a requirement to value plan assets more than annually. Information for the applicable time period may not be available by the statement deadline for that time period. In such cases, the statement may reflect information from an earlier time period.

If a plan, which is not participant-directed for other investments, treats participant loans as participant-directed, must the plan provide quarterly benefit statements?
No. The treatment of participant loans as participant-directed does not, by itself, mean the plan is participant-directed for benefit statement purposes.

If the plan is participant-directed, what limitations or restrictions on the right to direct investments must the statement contain?
The benefit statement need only communicate plan-imposed limitations and restrictions and not “external” limitations or restrictions imposed by investment funds, other investment vehicles, or by state or federal securities laws.

What language will fulfill the requirement that a participant-directed plan include a statement regarding the importance of a diversified investment portfolio?
FAB 2006-03 provides a sample statement that a plan administrator may use.

What is the DOL internet site that participant-directed plans need to reference in the benefit statement regarding individual investing and diversification?
http://www.dol.gov/ebsa/investing.html

May a plan that is subject to the employer stock divestment notice requirement (ERISA §101(m)) provide the required diversification information as part of the first benefit statement?
Yes. However, this relief only applies to a plan that, prior to January 1, 2007, provided participants and beneficiaries diversification rights at least equal to those required under ERISA §204(j).

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