Compliance June 10, 2011

Nonprofit Weighs in on Electronic Disclosure Debate

The Pension Rights Center, a nonprofit consumer rights organization, believes that current safe harbor rules balance the interests of participants and beneficiaries, and the interests of efficient plan administration. 
Reported by

In a letter to the Employee Benefits Security Administration (EBSA), the Pension Rights Center expressed its belief that “the safe harbor should be strengthened by requiring that participants affirmatively consent to the electronic delivery of a Summary Plan Description or the Periodic Pension Benefit Statement, even for employees who work with computers daily.”

The Center pointed out that for individual account plans, the Department of Labor’s (DoL) disclosure rules do not require all investment-related information to be delivered individually to participants. The final regulations for fee disclosure to participants use a layered approach to disclose investment information so that supplemental investment information may be presented on a website. The Center recommends that paper copies be provided upon request.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The Center’s second point was that electronic disclosure should not be the exclusive means of reducing the burden of disclosure requirements for plan administrators. The Center has previously testified that use of model notices and standard language, combining disclosure notices, and tailoring disclosure requirements to the specific notice might be ways to streamline disclosure requirements.

Lastly, the Center brought to EBSA’s attention that email is not necessarily the only form of electronic communication that should be addressed. “We are especially concerned about voice mail and other automated information provided over a telephone connection as a means of electronic disclosure,” the Center wrote in its letter. “It is our view that required pension disclosures cannot be delivered in an understandable manner by voice mail nor are most participants able to record or otherwise retain copies of these disclosures for future reference. Pension disclosures generally are complicated. Voices can be difficult to understand. Automatic phone calls are often ignored. Call-backs can be difficult at best. The Pension Rights Center recommends that the Department of Labor adopt a rule prohibiting use of any voice delivery technology to provide required disclosures.”

The Department of Labor accepted comments on its request for information regarding electronic disclosures until June 6. The Pension Rights Center complete letter is available here. 

Compliance June 10, 2011

Solis Continues Effort in McCravy Case

Secretary of Labor Hilda Solis filed an amicus brief with the U.S. Court of Appeals for the Fourth Circuit asking for a rehearing and reversal in the McCravy versus MetLife case. 
Reported by

In the brief filed on May 31, Solis asked for a rehearing and reversal of an appellate panel’s ruling that a “surcharge” is not an available remedy under Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA). She explained how the appellate panel relied on the Supreme Court’s decisions in Mertens v. Hewitt Assocs. and Great-West Life & Annuity Ins. Co. v. Knudson, and concluded that section 502(a)(3) of ERISA does not allow the court to surcharge Metropolitan Life Ins. Co (MetLife) for the life insurance proceeds that Debbie McCravy would have received from MetLife but for its alleged fiduciary breaches.

However, on the same day that the panel issued its decision, the Supreme Court decided CIGNA Corp. v. Amara, Solis pointed out. “Contrary to the panel’s decision holding that surcharge is unavailable, the Supreme Court’s decision in CIGNA states that surcharge is an available remedy under section 502(a)(3). The CIGNA opinion explains that surcharge, or monetary compensation by a fiduciary for loss resulting from the fiduciary’s breach of duty, was a ‘traditional equitable remedy’ and thus falls within the ‘category of traditionally equitable relief’.”

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“As CIGNA now makes clear, appropriate equitable relief under ERISA Section 502(a)(3) includes relief that makes injured participants and beneficiaries whole and thus permits the court to surcharge MetLife for the insurance proceeds that McCravy would have received but for the alleged breaches of fiduciary duty.”

Solis asked for a reversal of a lower court’s ruling when the case first came to the U.S. Court of Appeals for the Fourth Circuit (see “Solis Files Brief in Support of ‘Surcharge’ for Fiduciary Breaches”). 

The full text of the brief is at http://www.dol.gov/sol/media/briefs/mccravy%28A%29-5-31-2011.pdf

«