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Do you in an SPD or SMM describe a provision that expired?


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ERISA § 104(b)(1) calls for a summary of a new or changed plan provision “not later than 210 days after the end of the plan year in which the change is adopted[.]”  (Quotations from the statute and rule are in a recent BenefitsLink discussion.  https://benefitslink.com/boards/index.php?/topic/66810-rmd-2020-waiver-and-sample-amendment/&tab=comments#comment-308944)

 

For some provisions, taking that long time (and not communicating sooner) could result in describing a provision after every participant no longer has any decision she could make.

 

Just to pick one example, if in March 2020 a retirement plan’s sponsor adopted a provision for a coronavirus-related distribution, a summary of material modifications furnished in July 2021 might describe a provision that expired a half-year ago.

 

BenefitsLink mavens, what do you think:  Should an SPD or SMM describe a provision even if the description is no more than history?  Or is it better to describe the changed (and expired) provision, even if including the description confuses or otherwise burdens a reader?

 

For this question, assume the plan’s sponsor/administrator has yet done nothing to communicate the new or changed (and now expired) provision.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Personally, I think the biggest issue in your example  (CRD available only for several months during 2020) is the failure to TIMELY communicate to the participants their right to a special distribution before the expiration of such rights.

i.e.  what is the point of adopting such (an optional) provision if they are going to wait until 7 months after the expiration of the provision?

Notwithstanding the statutory deadline of July 31, 2021, an SMM explaining this provision should have been provided immediately after adoption of the amendment.

......  Jeff

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I agree that it doesn't need to be in the SPD if it's no longer applicable. But, those are DOL rules. Treas. Reg. 1.401-1(a)(2) includes in the definition of a qualified pension, profit sharing, etc. plan that it's a written program "which is communicated to the employees.."  The IRS hasn't provided detailed rules on the communication requirement (other than in limited situations, such as SH plans). But, as pointed out, if you don't communicate this type of provision, you'd have an effective opportunity problem that could violate the nondiscrimination requirements of 401(a)(4) if you don''t communicate it to the NHCEs once it's available. 

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Jeff Hartmann and G8Rs, thank you for your further observations.

 

You’re right that the essential failure is about not communicating promptly after the provision was adopted.  (I deliberately put that in the hypo.)

 

A challenge many lawyers face is that a client acted, or failed to act, with no lawyer’s or other advisor’s advice, and one spots a problem only after the harm already is done.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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59 minutes ago, Peter Gulia said:

A challenge many lawyers face is that a client acted, or failed to act, with no lawyer’s or other advisor’s advice, and one spots a problem only after the harm already is done.

Peter, say it ain't so! ?

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070
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I think that a lot of HR departments communicated quickly in documents less formal than an SMM. Also, media did a pretty good job. I think if back in April and May someone had an urgent need for funds, they probably had resources to figure it out.

 

 

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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  • 6 months later...

This is a great topic with amendment for the CARES Act, and I had a similar situation in which the client adopted provision to allow participants to elect not to take RMDs for 2020 calendar year.  This provision was adopted after 12/31/2020.  There were only 2 participants that were required to take RMDs.  The client does not wish to distribute a SMM for an expired plan provision that is not applicable anyways to the vast majority of participants.  Sounds to me like a SMM not required?

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For the query discussed above (including David Olive’s illustration), there are many ways a court, an arbitrator, an executive agency’s official, or a plan’s administrator (or its lawyer) might interpret ERISA’s §§ 102-105, § 404(a)(1), and related provisions.

As far as I know, there is no EBSA guidance that interprets the statute or a rule to discern whether a plan’s administrator must or should not describe an expired provision.  And I’m unaware of a consensus among employee-benefits lawyers.  (I suspect many have not been asked any question about this.)

If asked the question, it’s for each advisor to render her advice, considering the inquiring client’s interests and facts.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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