Products May 16, 2011

Principal Rolls Out Changes to Meet Disclosure Requirements

The Principal Financial Group announced it has made the necessary adjustments for advisers and plan sponsors to comply with new retirement plan fee disclosure regulations.
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Some of the changes made by The Principal for financial professionals to meet requirements include:

  • A redesigned and streamlined summary of fees based on feedback from plan sponsors and financial professionals
  • An interactive services Web page that helps plan sponsors review at-a-glance services available and used by the plan
  • An online disclosure landing page where plan sponsors can find the required information in one place

The Principal has also developed resources to make it easier for plan sponsors to make required disclosures to participants including: 

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  • Additional fee, plan and investment information in enrollment kits beginning in the fall; 
  • New annual notices about plan fees and investments available for plan sponsors to deliver to participants beginning in November; 
  • A new easy-to-understand investment comparison chart; and 
  • Modifications to the participant Web site and quarterly participant statements to display fees in dollars. 

The Principal has been offering education and information since the regulations were unveiled, including a dedicated online resource center at www.principal.com/feedisclosure; two white papers authored by ERISA expert Jamey Delaplane of Davis & Harman, LLP; and webinars for financial professionals and plan sponsors. The firm said it will add additional resources to help financial professionals and plan sponsors as they implement the new disclosures.   

The tools will become available in August, five months ahead of the January 1, 2012, deadline (see “EBSA Sets New 408(b)(2) Deadline for January 2012“).
Compliance May 16, 2011

Supreme Court Sends Back Cash Balance Notice Decision

The U.S. Supreme Court sent back a lower court decision that ordered CIGNA Corp. to reform its cash balance plan in awarding relief to participants on a conversion notice violation for further examination.
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The District Court found that CIGNA’s disclosures violated its obligations under statutes 102(a), 104(b), and 204(h) of the Employee Retirement Income Security Act (ERISA). In determining relief, it found that CIGNA’s notice defects had caused the employees “likely harm.” It then reformed the new plan and ordered CIGNA to pay benefits accordingly, finding its authority in ERISA §502(a)(1)(B), which authorizes a plan “participant or beneficiary” to bring a “civil action” to “recover benefits due . . . under the terms of his plan.”   

However, the high court said in its opinion that provision—which speaks of “enforc[ing]”the plan’s terms, not changing them—does not suggest that it authorizes a court to alter those terms here, where the change, akin to reforming a contract, seems less like the simple enforcement of a contract as written and more like an equitable remedy. The Supreme Court also rejected the Solicitor General’s alternative rationale that the District Court enforced the summary plan descriptions and that they are plan terms.   

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That reading cannot be squared with ERISA §102(a),which requires plan administrators to furnish summary plan descriptions, but does not suggest that information about the plan provided by those disclosures is itself part of the plan.  

A group of participants filed a lawsuit in 2001 contending that the cash balance program was age discriminatory, violated ERISA’s anti-backloading rule, and resulted in the forfeiture of accrued benefits. The participants further alleged that CIGNA’s notice of the plan conversion did not comply with ERISA.   

In 2008, the U.S. District Court for the District of Connecticut found the plan was not age discriminatory (see “Court Clears CIGNA of Cash Balance Wrongdoing“).  

The case is CIGNA Corp. v. Amara, U.S., No. 09-804.

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