The Pension Protection Act (PPA) requires that individual benefit statements are provided automatically to participants and beneficiaries on a quarterly basis for DC plans that allow participant-directed investments; annually for DC plans that don’t allow participant-directed investments, and every three years for DB plans to active or vested participants.
In addition to changing the frequency at which statements should be issued to participants and beneficiaries, the law also added to the information that should be included on the statements:
- DC plan statements must include the value of each investment in an individual’s account as of the most recent valuation date;
- DC plans that allow for participant-directed investments must describe the importance of investment diversification.
According to Segal, the key provisions in the DoL guidance are as follows:
- Defined benefit plans are not required to provide statements until at least the 2009 plan year;
- Statements must be provided within 45 days after the end of a period;
- Benefit statements may be delivered in written, electronic or other reasonably accessible form;
- DC plans that allow participant-directed investments must include language on the importance of long-term retirement security and of a well-balanced and diversified investment portfolio, including a statement that holding more than 20% of a portfolio in one entity may not be adequately diversified.
- For DC plans that allow all participants to direct investments, the statements must describe any plan limitations on those rights.
The rules are effective for plan years starting after December 31, 2006; however participants covered by collective bargaining agreements get an extension.
For participants covered by collective bargaining agreements in plans maintained under such agreements, the rules are effective for plan years beginning after the earlier of (1) the later of December 31, 2007 or the date on which the last collective bargaining agreement terminates (without extensions), or (2) December 31, 2008.
Multiemployer plan trustees and sponsors of other plans covering a mix of bargained and non-bargained people will have to decide whether to comply in stages, based on the literal effective dates, or to treat all participants the same and comply earlier than might be required for many of the participants, Segal said.