PPA Pooled Account Disclosures

[austin3515]

How are people handling PPA for pooled accounts? Are you just going to attach the relevant section of the pooled investment statement? Are you just going to give a listing of the funds and perhaps what percentage each security is of the total?

[austin3515]

Are people just ignoring this? I wanted to re-tickle this question. Can someone please just tell me I'm not crazy, that this is a requirement?

[Bird]

You're not crazy. How about this: "I forgot." (Steve Martin)

Actually, I didn't really forget but certainly back-burnered it waiting for this:

"(1) IN GENERAL.—The Secretary of Labor shall, within 1 year after the date of the enactment of this section, develop 1 or more model benefit statements..."

Until that happens, I feel safe ignoring it.

[J Simmons]

Hey, Austin,

Are you responding to an EE request for a statement? You say 'replying to PPA pooled account disclosures', so maybe you have a request. If not, you may be providing something that the PPA-amended statute does not require.

I think if you have pooled accounts, arguably you only have to provide the statement on request, not the PA taking the initiative to provide annually. ERISA 105(a)(1)(A) has three subparts for "INDIVIDUAL ACCOUNT PLANS". First, (i) provides that statements must be provided quarterly if the EE may direct the investments. The second part provides:

"(ii) at least once each calendar year to a participant or beneficiary who has his or her own account under the plan but does not have the right to direct the investment of assets in that account".

Thirdly, "(iii) upon written request to a plan beneficiary not described in clause (i) or (ii)."

If each EE does not have his own, 'eartagged' account under the plan, but the investments of the DC plan are pooled, then the PA would not have to take the initiative and provide annually, but only upon written request from the EE.

It seems that many have chosen to interpret ERISA 105(a)(1)(A) as if it just had the first two subparts, and read (iii) out, by suggesting that all non-directed DC plans must take the initiative and provide annually. That's not what the statute provides.

[Bird]

John,

I think (and I wouldn't mind being wrong) that the general interpretation of clause two is that it doesn't necessarily mean "eartagged account" as you say, but that it just means "account" as in something maintained in an admin system, even if it is just on paper.

Having said that, this suddenly sounds familiar, and I think I argued your point earlier, here or somewhere else! So now I'm confused, but still ignoring it.

[J Simmons]

Hi, Bird,

Suppose that the 'paper' ledger accounting for the pooled DC plan simply adjusts, from time to time, what percentage of the pooled accounts represent each EE's benefits. For example, if I have two EEs and one's benefits are as of 12/31/2007 just 38.8% and the other's is 61.2%, does either EE have "his or her own account under the plan" per ERISA 105(a)(1)(A)(ii) or would it be a DC plan under (iii)?

If on the other hand my 'paper' ledger that I keep goes one step further and applies the percentages to the balance of the pooled accounts, say $100,000 as of 12/31/2007, and thus there's a notation of $38,800 for the first EE's benefits balance and $61,200 for the other EE's benefits balance is that a DC plan under which either EE has "his or her own account under the plan" per ERISA 105(a)(1)(A)(ii) or would it be a DC plan under (iii)?

The way the statute is structured, it would seem that to avoid reading (iii) out entirely (canons of judicial interpretation abhor such an approach) there must be some type of DC plans in which the EEs do not have their 'own accounts under the plan'. What might that look like? Eartagged accounts that the respective participants do not have the option to direct investments seems the best fit to me.

I'm with you, Bird, on the confused part, but I'm having a hard time ignoring the question. One thing about it, if the PA takes the initiative and provides PPA-compliant statements annually for this non-participant-directed plan and again does so in response to a request, there's no possibility of being noncompliant.

[austin3515]

I am more than happy to wait but I'm troubled with your intepretation of iii simpy because it references beneficiaries exclusively, and not "participants and beneficiaries" as it does in clauses i & ii.

So it appears the distinction is not in the defition of an "account" but rather who has a standing to make the request. It is fairly common of course for a beneficiary to NOT have an account. For example, a dead-beat husband has skipped town; the spouse, as the sole beneficiary, seems to be able to request a statement regarding the investment of the husband's account. To be more clear on my point, the spouse is a beneficiary not described in i or ii, because she does not have an account balance.

And finally, a beneficiary could have an account balance in the plan if the individual inherits the balance of a deceased participant. So it seems to me that every provision seems to have a very reasonable appplication.

I'm happy to join the bandwagon of those waiting for some information from our friends at the DOL. I'll certainly be blaming them for needing to provide information to participants 2x, instead of just once!

But I will say this: I thought we had a much better case for leaving out information on social security integration on the quarterly statements - there was a big thread many months ago on these boards