Electronic Mutual Fund Prospectuses

[Guest cxs]

Currently we provide enrollment packages for new participants with hard copy prospectuses of all the funds the plan offers. We also distribute prospectuses whenever a new fund is offered. We would like to eliminate this and have hot-links to the fund family web site on our web site instead. We would give the plan administrator a small supply of prospectuses for participants without access to a computer. We would send a pin number to the employee as soon as he is eligible to participate in the plan; he would then be able to access our web site and be directed to the fund family web sites.

Does anyone know if this is common practice? What are the DOL/IRS rules on prospectuses? Anyone have any experience with this?

Thanks!

[mbozek]

Prospectus distribution is governed by SEC rules not DOL or IRS. You should check with the SEC or counsel. My understanding is that the investors must be allowed to chose how to receive the documents and a paper document must be provided upon request. I dont think that the plan can require that participants with computer access must down load the documents.

[Kirk Maldonado]

Mbozek is partially right, in that the SEC rules generally govern the prospectus delivery rules.

However, to avoid duplicative disclosures, all of the employers I've represented opt for a unified approach. Thus, the disclosures need to satisfy both (1) the securities laws requirements and (2) those relating to tax-qualified retirement plans.

You need to retain counsel who is familiar with both sets of rules. (Don't waste your time contacting the SEC; their grasp of tax-qualified retirement plans is very, very limited. Which is something that they freely and openly admit.)

[E as in ERISA]

ERISA 404© (which include prospectus requirements) is subject to the DOL regulations on electronic communications. Under those regulations it is not enough for someone to have "access" to a computer, through a kiosk etc. The use of the computer must be an "integral" part of the person's job. Otherwise you have to meet all the consent requirements.

[E as in ERISA]

See http://www.benefitslink.com/erisaregs/fina...cdisclosure.pdf