Summary of new DOL regulations re ability of DOL to request SPDs or ot

[Dave Baker]

Here's a short summary of regulations recently issued by the Department of Labor to implement a change in ERISA under the Taxpayer Relief Act of 1997.

The regulations are online at

http://www.benefitslink.com/erisaregs/docu...t_request.shtml

TRA '97 eliminated the obligation of plan sponsors to file SPDs with the DOL, but also added a provision in ERISA providing the Department of Labor with the authority to request the plan administrator to provide a copy of a plan's SPD. The regulations implement that authority.

The DOL may request an SPD at any time, not just in response to a plan administrator's refusal to provide the SPD to a participant or beneficiary. The DOL said the law is intended to provide participants with an "independent source" for SPDs. A plan is not permitted to charge DOL a copying fee. Failure to provide the SPD gives the DOL the ability to assess a fine of up to $100 per day starting 30 days after the DOL's request (capped by statute at $1,000 per request). The fine would be the personal liability of the plan administrator, not a charge against the plan.

In the preamble to the regs, the DOL noted that SPDs already on file with the agency under pre-TRA '97 law continue to be available to participants; they have not been destroyed.

The regulation also applies to a second class of documents: those that have been requested by a participant or beneficiary pursuant to ERISA section 104(B)(4) which the plan administrator has failed to furnish. That section describes the right to make a written request for an SPD, the latest annual report (Form 5500), the plan's "trust agreement," and the plan document ("other instruments under which the plan is established or operated"). Upon a plan administrator's "failure" to provide such a document -- presumably meaning the administrator's failure to meet the 30-day deadline required by ERISA 502©(1) -- the DOL has authority under the new regulation to make its own request to the plan administrator. The new regulation hence provides "teeth" to the right of a participant or beneficiary to obtain such documents, because a federal watchdog agency will have the ability to assess a penalty of up to $100 per day in addition to the ability of a participant or beneficiary to bring a suit under ERISA asking a court to award a penalty of up to $100 per day against the plan administrator.

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Were there any parts of the new regulation that took you by surprise or seem especially noteworthy? Please feel free to add a reply to this message thread. Thanks!

[MGB]

If a person, such as myself (not a participant or beneficiary), requests a copy of an SPD from the DOL, they politely say they do not have it,....but they'll get it for me. I.e., ANYONE asking the DOL to get an SPD will get the DOL to request one.

I was confused as to whether this would invoke the penalties if the company did not respond. It seems it would.

Next issue is what happens when a company doesn't respond? Shouldn't that raise a red flag to the DOL that maybe they don't have an updated SPD to furnish? (Do I hear the word "audit" here?)

[Dave Baker]

Yes, literally the SPD part of the regulation doesn't kick in only when the DOL gets a request from a participant or beneficiary who has been refused, though the preamble has this to say:

"In the preamble to the proposed regulation, the Department indicated that, while section 104(a)(6) conferred broad authority on the Secretary to request documents, the Department generally intended to limit the exercise of its authority under Sec. 2520.104a-8 to requesting SPDs on behalf of participants and beneficiaries."

And it's probably also significant that the preamble talks about "participants and beneficiaries" (not other persons) having an "independent source" for SPDs, even where a participant or beneficiary has not been refused a copy of the SPD:

"As explained in the preamble to the proposed regulation, the Department believes that the elimination of the SPD filing requirements, taken together with the establishment of civil penalties for failures to furnish requested documents, clearly evidences Congress' intent that the Department would exercise its authority to ensure that participants and beneficiaries would have an independent source for SPDs."

I would guess that as a matter of procedure the DOL just won't agree to write letters seeking SPDs on behalf of persons other than participants and beneficiaries.

[Guest IWIS]

As a former DOL employee, the regulation surprised me. I left the DOL just last year, and many (if not all) of the people in my field office were unaware that the regulation was in the works. In fact, the DOL's authority to request plan records in the context of a participant assistance matter was a disputed issue in my office.

About five years ago, the DOL decided to significantly expand its "customer service" function. In doing so, it created a new position called "Benefits Advisor" (BA) and began a massive hiring effort in that regard. They also created new supervisory positions in each field office strictly for the BAs. (Before the DOL had BAs, the investigators took complaint calls on a rotating basis.)

Trouble was, it happened very fast and no one knew exactly what the BAs had the authority to do. While they did an excellent job considering they had no investigative training, it wasn't uncommon for them to request documents as if they were conducting a formal investigation (payroll records, bank records, corporate acquisition agreements). Some were also quoting ERISA section 504 in their document request letters, although no formal investigation had been commenced or recommended.

A few investigators in my office took issue with these practices (there were a number of different problems) and the situation was rectified to some extent. Ironically, the recommendations made by our investigators were exactly the same as those embodied in the final regulation. I personally think the regulation makes a lot of sense and that it's long overdue.

However, in order for the BAs to maintain the level of "benefit recoveries" they effect on behalf of Ps and Bs, they'll probably have to utilize the telephone more often and become more creative in terms of how they write their letters to plan sponsors. My guess is that the letters will become more informational and less adversarial, and that participant complaints are likely to be referred for investigative consideration more swiftly when plan sponsors are uncooperative.

[Dave Baker]

One other noteworthy point about the new reg is the DOL's definition of "participant or beneficiary" -- in addition to the ERISA definition of participant and the ERISA definition of beneficiary, the reg includes:

"(2) An alternate payee under a qualified domestic relations order (see ERISA section 206(d)(3)(K)) or prospective alternate payee (spouses, former spouses, children or other dependents);

(3) A qualified beneficiary under COBRA (see ERISA section 607(3)) or prospective qualified beneficiary (spouse or dependent child);

(4) An alternate recipient under a qualified medical child support order (see ERISA section 609(a)(2)©) or a prospective alternate recipient; or

(5) A representative of any of the foregoing."

Hence these persons now have a clearer avenue for getting assistance from the DOL when a plan administrator refuses to provide them with a copy of the plan document or SPD.

[Guest Chuck Miller]

Dave,

Does a participant or beneficiary have to wait 30 days after submitting a written request for documents to ask the DOL to reqest the documents for them, or can they ask the DOL immediately? I'm not quite sure from your comments.

Also, beneficiaries always had the right to SPDs and other documents, the new rules seem to clarify just who is beneficiary.

And I thought it was $110 per day for non-compliance with a reqest, not $100.

Chuck Miller

[Guest IWIS]

My reading of it is that, except for the SPD, the participant must wait the time required by law depending on the particular document being requested (sometimes longer than 30 days) before the DOL can intervene. The SPD can be requested by the DOL at any time.

[Guest Chuck Miller]

So a participant that requests an SPD from a plan sponsor can request an SPD from the DOL at the same time?

[Guest IWIS]

Theoretically, I guess. But why would a participant want to do that? I would also hope that, as a general rule, the DOL would instruct participants to make an attempt on their own before intervening, and that intervention as an initial course of action is only used when unique circumstances warrant. I don't think the regulation creates an automatic right to government assistance.

[Dave Baker]

Here's another article with some analysis of the new reg:

http://www.kilstock.com/site/print/detail?...Article_Id=1007

[Dave Baker]

Yes, it's clear that the DOL reg says they'll be able to request an SPD even before the plan administrator has failed to provide one.

Dunno about the $110 figure; I know the DOL did adjust some other $100 penalties up to $110, but I haven't looked up the authority for doing so and whether it extends to this new provision of ERISA (502(d)(6)).