Mailing of Prospectus

[Guest Juice]

In a 401(k) plan, how often do you need to send the eligible employees a copy of the prospectus. (Background) Currently we send them when the EE first beomes eligible and every time the employee makes a trade on the account. Also they are available through a automated phone request system. Any help would be appreciated.

[Kirk Maldonado]

Under federal securities laws, the prospectus needs to be updated in a "timely fashion" each time there is a "material" change in the plan. Unfortunately, there isn't a lot of guidance as to the precise meaning of these nebulous terms. Don't forget that the table of the investment returns (earned on each of the investment alternatives available under the plan) needs to be updated annually, so you need to provide an update of at least that portion of the prospectus annually.

[Dowist]

1. The ERISA 404© regs. (self-directed plans) apparently do not require plan sponsors to automatically send out new prospectuses - I beleive the requirement is that participants get a prospectus when they first make an investment direction in a particular fund. Also, they may have a right to request a prospectus.

2. The mutual fund companies have an obligation to send a prospectus to the owner of the shares of the fund - but this would be the plan itself.

3. The participants' interests in the plan may be considered a security interest (it depends upon whether there is company stock in the plan), in which case the plan has an obligation to send a prospectus for the plan to participants.