In April of 2017, the ERISA Advisory Council on Employee Welfare and Pension Benefit Plans announced a review of ERISA's required disclosures and notices. The Council sought input from stakeholders on a number of topics, in part, to determine if current ERISA requirements should be amended or modified. A number of policy centers and ERISA industry parties responded with recommendations to simplify ERISA disclosure requirements.
The ERISA Advisory Council looked at a number of issues, including:
- Reducing duplicative disclosure requirements
- Improving the communication of the content in existing disclosures
- Making disclosures readable in accordance with federal plain language guidelines
- Making disclosures material to a participant's understanding of their plan
- Optimizing the objective of the specific disclosures
- Indicating when action is required or notices are for information purposes only
- Use of summary disclosures
- The most effective and efficient methods of disclosure design and distribution
- How requirements impact small, medium, and large single and multiemployer plans
Recommendations have included requiring fewer disclosures and notices and making notices simpler to understand. Reduced disclosure notices would lessen the burden on plan providers and help ensure plan participants are not overloaded with confusing plan information that does not require action on their part.
When most plan participants open up mail from their plan provider, they want to know whether the notice provides information that will impact their own plan. Providing simple answers to basic questions may inform participants of the importance of the notice and whether they have to take any action. The Pension Rights Center recommends disclosures provide answers to the following questions:
- What is this?
- Why am I receiving it?
- What do I do with it? Must I do anything?
- Will this affect my current or future benefits?
- Whom do I contact at the plan or EBSA with a question?
According to some plan providers, employees and plan participants receive too many disclosures over the course of the year. These disclosures can be long and complicated, leaving some participants more confused after receiving the disclosures than before reading the notices. Other participants may treat disclosures like junk mail, throwing the information away before even opening the notices.
Many participants fail to read disclosures because they are used to receiving so many notices a year. Others fail to read the disclosures because the information appears too technical and complicated. Disclosures may also lack a summary, leaving few participants who go through the process of reading the lengthy disclosures.
Suggestions to improve mandatory disclosures include providing a single once-a-year disclosure packet. This could include a single mailing that contains the annual funding notice, summary plan description (SPD), benefit statement, fee disclosure, safe harbor notice, and summary annual report (SAR). With many plans, participants currently receive these notices at multiple times during the year.
If you have any questions about mandatory ERISA disclosures and notices for your pension plan, contact Butterfield Schechter LLP. We are San Diego County's largest firm focusing its law practice on employee benefits. Our firm can help your company establish employee benefit plans, maintain ERISA compliance, and represent your company in ERISA litigation. Contact our office today with any questions on how we can help you and your business succeed.