Benefits In Brief

After months of delay, the Department of Labor (“DOL”) today released final regulations under Section 408(b)(2) of ERISA, requiring retirement plan service providers to disclose information about their services and fees to plan sponsors.  In doing so, the DOL delayed the effective date of those rules and made minor modifications to them.  The final regulations defer the compliance date from April 1 to July 1, 2012.  As a consequence, plan sponsors will also have more time to comply with the related participant-level fee disclosure rules.

A small, Oklahoma-based employer recently learned that inattention to 401(k) plan governance can create costly corporate liability. It also learned that retaining the responsibility for collecting plan participants’ investment election forms, and then forwarding them to the plan's recordkeeper, may not be advisable.

Most sponsors of Section 401(k) plans are familiar with the standards for allowing active employees to withdraw their elective deferrals on account of “financial hardship.” The same hardship withdrawal standards apply to Section 403(b) deferrals. However, far more stringent in-service withdrawal standards apply to nonqualified deferred compensation arrangements that are subject to Code Section 409A.  These “unforeseeable emergency” standards apply to Section 457(b) plans, as well. In its Revenue Ruling 2010-27, the IRS has helped to define the scope of these unforeseeable emergency standards.

The Internal Revenue Service has announced that a new Form 8955-SSA (“Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits”) has replaced Schedule SSA to the Form 5500.

On July 15, 2010, the Department of Labor (“DOL”) issued “interim” final regulations regarding the fee information that service providers must disclose to fiduciaries of ERISA-covered retirement plans. This information is intended to assist fiduciaries in assessing the reasonableness of contracts or arrangements for the provision of services to the plan, including the reasonableness of the service provider’s compensation and the potential for conflicts of interest.

The U.S. Supreme Court has ruled that plan administrators may rely on the documents governing the plan, and have no duty to look beyond those documents, to determine the beneficiary of a deceased plan participant.

Plan administrators should review and update the written notices they send to participants when making distributions from their retirement plans. Recent changes in the law have expanded the rollover options available to recipients of such distributions, and these should be reflected in the notice.