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UPDATED – DoL Electronic Delivery Guidance: The Good, the Bad, and the Not so Bad

UPDATE – The Department of Labor (“DoL”) has updated its previous guidance on electronic disclosures to clarify that investment-related information, including the required comparative chart, may be provided through a secure, continuous-access website, subject to the other requirements in the guidance, as described in our updated post below.   The ability to use a secure continuous-access website for these purposes was unclear in the prior guidance.

In September, the DoL released interim guidance on electronic delivery of certain participant fee disclosures which was recently updated. Remember that account balance plans (like 401(k) plans) that allow participant direction of investments have to provide new participant-level fee disclosures beginning in April-May of 2012. Some disclosures can be included in quarterly benefit statements, like the amount and description of administrative and individual fees charged to a participant’s or beneficiary’s account. Other disclosures are required before a participant or beneficiary can first direct his or her investments or at other times and these generally cannot be included in quarterly benefit statements (either for legal or practical reasons).

When the DoL issued these final fee disclosure regulations last year, it intentionally did not address how the information would be furnished. However, given that the compliance deadline is forthcoming, the DoL issued Technical Release 2011-03 that addresses how these disclosures can be provided in an electronic form until more permanent guidance can be issued.  Plan sponsors and administrators can choose either to follow this new guidance or use

New EBSA Consumer Assistance Website

New EBSA Consumer Assistance Website

November 23, 2011

Authored by: benefitsbclp

The Department of Labor’s Employee Benefit Security Administration (EBSA) is making it easier for consumers to submit questions and complaints regarding their health and retirement plans. EBSA has created a new consumer assistance website which allows users to submit inquiries electronically.  If you hablo Espanol, it’s also available in Spanish.

The DOL claims the new website provides easy access to useful information through links for resources/tools, hot topics, and publications. It also provides links to electronic forms where a user may “Ask a Question”, “Submit a Complaint”, or “Report a Problem.” EBSA seems to be serious about wanting to hear from consumers and give them assistance by promising to respond to all inquiries within three business days.

What does this mean for employers? The increased ease in which employees can submit complaints regarding their health and retirement plans to the DOL may lead in increased government scrutiny. Employers should now, more than ever, make it a point to respond to employee inquires quickly and adequately. If an employee is not satisfied with their employer’s response, they now have a quick means to complain to the government. Employers should also be sure to thoroughly document their responses to employee questions and complaints, including the rationale, just in case the DOL comes knocking.

If It Isn’t Written Down, It Didn’t Happen

If It Isn’t Written Down, It Didn’t Happen

November 8, 2011

Authored by: benefitsbclp

 

We’ve all heard the old adage, advising us to record our thoughts and actions, lest they become lost to obscurity. In EP Quality Assurance Bulletin 2012-1, released November 2, the IRS reminds us of the importance of documentation with regard to the qualified plans in our lives. The Bulletin, entitled “Verification of Prior Plan Documents in the Absence of a Determination Letter,” provides IRS determination letter specialists with updated guidance on verification that retirement plans have been timely amended for prior legislation.

If you are filing your plan during the second remedial amendment cycle and you already have a d-letter covering the first cycle, you need to include all good-faith and interim amendments adopted after your first cycle submission.  In addition, you should include any discretionary amendments adopted since the issue date of the d-letter. However, if you are filing for a plan that does not yet have a d-letter, all amendments going back to the beginning of the EGTRRA amendment cycle should be included in your submission.

If a specialist determines that verification of compliance with additional laws beyond the cycles described above is warranted, he or she may expand the inquiry with managerial approval. This is where it could get tricky for plan sponsors. What if plan documentation cannot be produced? In the Bulletin, the IRS provides that if pre-GUST documentation is necessary (but the plan documents are missing), specialists should secure other evidence from the employer, including a prior d-letter, board

Compliance with ERISA Fee Disclosure Rules Considered Consistent with SEC Mutual Fund Advertising Rules

The Securities and Exchange Commission (“SEC”) issued a “no action letter” on October 26, 2011 indicating that issuing disclosures compliant with the Department of Labor (“DOL”) participant fee disclosure rules will not be considered inconsistent with the SEC Rule 482 advertising requirements that apply to mutual funds.

Participant Fee Disclosure Rule – DOL Regulation Section 2550.404a-5 requires plan administrators of participant-directed individual account plans to disclose, among other things, plan and investment-related information. Initial disclosures are not required until 2012. The performance data required to be disclosed in the regulation must be presented in a chart or other comparative format. Generally, the chart must include the average annual total return of the fund for the one-, five, and ten-calendar year periods ending on the date of the most recently completed calendar year. The DOL regulation also requires certain other disclosures, but, with respect to a money market fund, does not require inclusion of the fund’s most recent yield.

SEC Rule 482 – This SEC rule requires advertisements and other sales materials for certain mutual funds to include, among other disclosures, uniformly calculated performance information. In general, the rule requires performance data to be current as of the most recent calendar quarter ending prior to the publication of the advertisement (or sooner if the advertisement is provided telephonically or through an Internet site). An advertisement for a money market fund must also include a quotation of the fund’s current yield.

Problem – Comments submitted in response to the

Letters From Your Friends at the IRS About Your Form 5500

Letters From Your Friends at the IRS About Your Form 5500

October 20, 2011

Authored by: benefitsbclp

The IRS Employee Plans Compliance Unit recently announced that they would be sending letters to plan sponsors whose Form 5500 filings were six to nine months late. From our experience, these letters are usually sent because there was a simple error, such as transposed numbers in the employer’s EIN or failing to mark a final return filed in a prior year as the “Final Return/Report.” Most often, a corrected copy of the Form 5500 will suffice to make the IRS go away for this purpose. A failure to respond to a compliance check letter could result in an audit referral to the IRS’s Employee Plans Examinations or the Department of Labor (“DoL”).

If an employer discovers a simple error, such as those noted above, whether via a letter from the IRS or otherwise, we generally recommend that the employer file an amended return with the DoL processing center coupled with an explanation detailing the error being corrected. The IRS and DoL are not always able to coordinate as efficiently as we or they would like, so sending a revised return to the IRS does not necessarily mean that the DoL has received it. The employer could be contacted separately by the DoL for the same reason the IRS contacted them, even after the IRS has notice of the corrected filing. Admittedly, filing an amended return does not always alleviate this additional hassle, but it has the potential to head it off at the pass and it makes dealing

Special Action Items for October

Special Action Items for October

October 13, 2011

Authored by: benefitsbclp

This is a brief reminder on common time-sensitive matters. We distribute these by email every month. If you would like to be added to the list, please comment below or email one of us. If you have questions, please call one of us. Thanks very much.

DEADLINES

Only a few days left to comply with these deadlines:

  • October 15, 2011 is the last day that a calendar-year plan can be corrected by amendment and in operation to address failure of the minimum coverage requirements of Code Section 410(b) and the general nondiscrimination requirements of Code Section 401(a)(4) in 2010. Has your plan received these tests from the plan’s recordkeeper?
  • 2011 third-quarter contributions to defined benefit plans must be made by October 15, 2011.
  • Calendar-year defined benefit plans with 100 or more participants are required to submit online premium filings to the PBGC by October 17, 2011. Special rules apply for new plans and plans with changed plan years. Click here for instructions.
  • For calendar-year plans that filed for an extension through Form 5558 by August 1, 2011, the 2010 Form 5500 must be filed by October 17, 2011.
  • The due date for the Form 5500 of a direct filing entity, such as a master trust, is 9? months after the end of the DFE’s fiscal year. For a direct filing entity with a calendar fiscal year, the filing deadline for the 2010 Form 5500 is October 17, 2011.

Other upcoming filing deadlines:

Is Prime + 1% a Reasonable Interest Rate for Qualified Plan Loans?

Is Prime + 1% a Reasonable Interest Rate for Qualified Plan Loans?

September 26, 2011

Authored by: benefitsbclp

In a phone forum held on September 12, 2011, Internal Revenue Service (“IRS”) officials were reported by BNA Pension and Benefits Daily in a September 13, 2011 article by Florence Olsen as indicating that the Prime rate + 1% may not be a reasonable interest rate under the Internal Revenue Code prohibited transaction rules which apply to loans from qualified plans. For corrections and audit purposes, the IRS may be looking to the Prime rate + 2%. In recent years, plan administrators typically set the interest rate for plan loans as the Prime rate + 1% in effect on the first of the month during which the loan is originated (or a similar set date). If a participant can not secure a loan in the open market with an interest rate of Prime + 1%, the IRS official indicated that the Prime rate + 2% may be a more appropriate measurement of a reasonable interest rate.

A qualified plan loan is distinctly different than a loan obtained on the open market. Repayments are generally secured through payroll withholding and transmitted by the employer directly to the plan. In addition, the collateral for the loan is secure since it’s the participant’s own account balance in the plan. Therefore, the source of loan repayment and the collateral are likely to be more secure in the context of a qualified plan loan than a loan obtained in the open market. Arguably, these factors weigh in favor of a lower

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