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providing participant statements to participants in brokerage accounts


AlbanyConsultant

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I've re-read ERISA 105, and we're debating if it's necessary to send annual participant statements (from our recordkeeping system) to participants who are fully invested in self-directed brokerage accounts.  What they are not getting from those accounts are (a) vesting by money type and (b) information about their loan balance (where applicable).  At the moment, that's all that they are functionally missing - while it might be nice to know how much of their balance might be in the deferral money source vs. the profit sharing, if it's all vested, it doesn't matter as much.  So we're thinking that if a plan is by design fully vested, then we can skip the statements; we'd still provide statements if the plan has sources subject to vesting, even if all participants are fully vested due to accruing enough years of vesting service.

As for loans... I don't see that as being a requirement anywhere, so we're on the fence about it.

Any comments, ideas, etc.?

And I know that this could or will or may change once we get new rules on lifetime income wording, as I suspect that the brokerage accounts won't put that on their statements (I will be happy to be wrong about this, though) - since many of them aren't even set up as "retirement plan accounts", why would they follow retirement plan rules?

Thanks for your thoughts.

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You don't have to provide a participant statement if they get their brokerage statements.  But there is a bunch of "stuff" that needs to be provided in an annual notice - as you note, vesting.  But also fees, voting rights...that's the gist of it.  Oh and some nonsense about permitted disparity if that applies.

Ed Snyder

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Loans are part of the participant's account balance, (usually) just a directed investment, so I don't know how that can be "on the fence" in terms of statement presentation. However, if they get an annual statement on just their loan from some source, you're probably covered.

You mention brokerage statements for those fully vested - so you give statements off your system for those not vested but then stop once they're vested? That seems odd. Also, does the obligation to tell someone they're fully vested go away after you tell them once? I don't know, but just throwing that out there as well.

As you note, lifetime income disclosures will likely change that landscape regardless.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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So to piggyback Bird - you don't need a separate statement showing all the brokerage account information but do need to communicate those necessary annual items that might otherwise have been on a statement.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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19 hours ago, CuseFan said:

Loans are part of the participant's account balance, (usually) just a directed investment, so I don't know how that can be "on the fence" in terms of statement presentation. However, if they get an annual statement on just their loan from some source, you're probably covered.

Good point; if the brokerage statement doesn't show loan balances, and it probably does not, then they are not getting their full balance on the statement.  I guess you could argue that if you gave them an amortization schedule they have all the info they need.  

Ed Snyder

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