SPD requirement - the 5 year issue

[John Feldt ERPA CPC QPA]

Under ERISA Section 104(b)(1):

"The administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, every fifth year after the plan becomes subject to this part an updated summary plan description described in section 102 which integrates all plan amendments made within such five-year period, except that in a case where no amendments have been made to a plan during such five-year period this sentence shall not apply."

With all of the amendments required since GUST, such as 401(a)(9), 401(a)(31(B), Final 401(k)/401(m) regs, I think it looks like a fully revised SPD should be given out now.

If that's correct and the plan was restated for GUST in 2002 (and the SPD was provided in 2002), assuming the plan year is calendar year, would you interpret that to mean a revised SPD must be provided by 12/31/2007? Or some other date? Please comment.

On edit, I've added: Would anyone like to see this can be changed to align with the 6-year restatement cycle to be 6 or 7 years instead of 5?

[J Simmons]

Yeah.

I've suggested it two or three times to the ERISA Advisory Council. Haven't heard anything yet. Maybe it ought to be suggested to Mort Klevan.

[Peter Gulia]

It might be unnecessary to consider whether Congress should lengthen the ERISA § 104(b)(1) five-year interval. That statutory command for integrating explanations into a revised SPD is only one of a plan administrator’s duties. Courts have interpreted ERISA to recognize a fiduciary’s duty to communicate information that participants, beneficiaries, and alternate payees need to know. And those communications must be no less helpful than those that a prudent-expert fiduciary would use for the purpose of providing benefits and administering the plan in circumstances similar to those of the plan and participants involved.

Some practitioners suggest that it’s easier for a fiduciary to meet those duties if the plan’s administrator revises and delivers a new-edition SPD every year. The expense of the revision will almost always be a proper plan-administration expense. And with many workplaces using e-mail delivery for most participants, the expense of delivery often is quite modest.

[John Feldt ERPA CPC QPA]

Hmmm. Well, with the packet of annual notices required now for 404©, safe harbor, default investments, automatic enrollment, etc., maybe throwing in a new SPD every year might not seem too expensive for the client to ask us TPA folks to provide, perhaps.

If anyone cares to add their input, I am curious:

1. Yes or No: Do any of your clients want you to provide a new SPD every year?

2. How many, what percent?

My response:

1. No

2. 0, 0%

Lastly, do you think we should be educating them to steer them toward such a conclusion?

[Bird]

My response:

1. No

2. 0, 0%

Ditto.

Lastly, do you think we should be educating them to steer them toward such a conclusion?

No

[WDIK]

1. Yes or No: Do any of your clients want you to provide a new SPD every year?

No. In fact, the majority complain that we provide one every five years.

[Belgarath]

I believe the date, given your parameters, is 210 days after 12-31-07. See DOL 2520.104b-2(b).

Link attached. http://a257.g.akamaitech.net/7/257/2422/12...2520.104b-2.htm

And no, we wouldn't do a new SPD every year.

[John Feldt ERPA CPC QPA]

Thanks Belgarath, that agrees with our conclusions from late yesterday.

[Peanut Butter Man]

With Rev. Proc. 2005-66, it makes more sense to me if the requirement is extended to 6 years. 6 years would match the restatement cycle for prototypes and volume submitters. For individually designed plans on the 5-year cycle, they would easily meet this requirement by providing a new SPD every 5 years when the plan is restated.

Wonder if the IRS and DOL will coordinate this. Our practice is to provide a new SPD when the plan document is restated. With the 6 year restatement cycle for our prototypes and volume submitters, we are changing this to providing a new SPD when the plan is restated or when the 5-year SPD rule comes into play.

[John Feldt ERPA CPC QPA]

What would the penalty be if an updated SPD was required (due to amendments during the last 5 years since the last SPD was written), but an updated SPD wasn't done/distributed timely?

Is it $110 per day per participant?