Periodic Pension Benefit Statement Requirement

[PainPA]

Who can shed some light on a supplemental QUARTERLY statement requirement under Sec 508 of the 2006 PPA.

When it is it required if the plan is say with John Hancock.

[J Simmons]

It depends on whether you have individual Plan accounts--or just a pooled Plan investment account in which each employee has a proportion that is updated periodically, such as through balance forward accounting. If the employee is able to direct the investment of his or her benefits, then individual benefit statements are due quarterly. Even if the plan uses a fiscal plan year, the quarterly statements are required for each calendar quarter; they are due 45 days after the calendar quarter has ended. The information provided must be as of a date in the calendar quarter being reported.

Many employers that I advise chose to stop individual direction of investment and fold the individual Plan accounts into a single pooled account. Either the trustee or an investment committee meets quarterly (or in volatile investment market situations, more frequently) to make the investment decisions for the entire pooled account.

Once a year (some employers choose more frequently), everyone's proportionate share of the pooled account is re-determined, to take into account new contributions made during that year, and then a simplified benefit statement is provided. This is done as of the plan's required valuation date (last day of plan year). The statements show each employee his or her accrued benefits total(s), vesting years earned and applied, to show also the vested amount. Doing this at least once every 12 months avoids having to do it in the interim, even when an employee requests.

Given the penalties for being late with the quarterly reports, and not having 404© liability protection against investment underperformance claims even on self-directed accounts if all the employee's fee information is not properly disclosed, the pooled account approach seems more attractive and less costly to employers not using (and paying for through asset assessments) the platforms like John Hancock's. Given some federal court decisions since 2000, as long as the trustee/investment company meets periodically, gives due consideration to each investment change proposed by a qualified investment adviser, and keeps files of doing so, there is probably less liability for plan officials than trying to do the now very cumbersome quarterly reporting chores attendant to participant directed accounts.

[PainPA]

That is good information.

The plan is with John Hancock whereby they send the participant statements quarterly. I cannot understand why this former TPA of the plan required for this supplemental statement other than it had language on it about permitted disparity.

I have safe harbor plans that include the same language and the notice I provide is more of annual notice instead of strictly a safe harbor notice.

However, this plan is not a safe harbor plan.

[Bird]

I cannot understand why this former TPA of the plan required for this supplemental statement other than it had language on it about permitted disparity.

That's why. If the plan uses permitted disparity, the quarterly statements are supposed to have a description of it. We do this (silly) exercise. It's a fairly good reason not to use PD, especially since there are no practical impediments to general testing.

Widely ignored, no doubt.

[Belgarath]

Although there are a few instances when after grouping, regrouping, restructuring, standing on your head, and swinging a dead rat by its tail in full moonlight, PD still produces a better result for the HC's than a general tested plan does.

[BG5150]

We send out (or tell our clients to send out) the supplemental statements, too. They include the vesting schedule, as a lot of carriers do not track vesting for plans with TPAs.

[Bird]

Although there are a few instances when after grouping, regrouping, restructuring, standing on your head, and swinging a dead rat by its tail in full moonlight, PD still produces a better result for the HC's than a general tested plan does.

But if you impute disparity in the GT then you get to the same place that you would if you did it in a formula (except for the slight difference between using 5.7% and 5.4% or whatever).

[Belgarath]

Good point. I just know that on RARE occasions, I've seen test results (that I didn't even attempt to analyze) that indicated the results were better with the PD. I know they tried the dead rat, but I don't know if they tried imputed disparity! Probably not.

I suppose this could also be affected by documents and software - maybe just easier to use PD if "standard" rate group testing doesn't work as well, and it is extra work/complication/input to use imputed?

Your comment certainly seems logical.

[BG5150]

Well, a PD allocation automatically satisfies the testing doesn't it? So, just have a general tested PS int he document and allocate as with PD and be done with it.

No?

[austin3515]

Permitted disparity at less than the wage base is why you still need to include it in the documents sometimes. We just send our PPA notices to the FBO account plans. I'm prepared to staunchly defend my self if it ever presents a problem that We of course send a statement to the FBO plans at year-end with their vesting.

With respect to vesting, we update the vesting with every recordkeeper that we work with, Post PPA (actually 6 years post PPA, or 8 more??) I have a hard time believing that there is a recordkeeping platform that does not track vesting. Are you saying such a recordkeeper exists BG?

P.S. I am glad everyone seems to be universally ignoring the three-times-as-silly requirement to disclose each individual security in a pooled plan. Talk about a non-starter. [ok, I know some of y'all are doing it].

[Bird]

Well, a PD allocation automatically satisfies the testing doesn't it? So, just have a general tested PS int he document and allocate as with PD and be done with it.

That's pretty much my attitude. I think I could create a scenario where a PD allocation doesn't satisfy the general test - yes, if you have a low-paid HCE - so you do have to run the test. But I like having the flexibility - if all of a sudden new comp works, it doesn't require a plan amendment.

P.S. I am glad everyone seems to be universally ignoring the three-times-as-silly requirement to disclose each individual security in a pooled plan. Talk about a non-starter. [ok, I know some of y'all are doing it].

Yes, doing it. No quarrels with anyone not doing it; I ignore some other things that I deem silly.