The 2017 ERISA [Employee Retirement Income Security Act] Advisory Council examined how to streamline the content and to make the delivery and availability of mandatory retirement disclosures more practical and effective.

Based upon testimony received during two sets of hearings supplemented by submissions of written material from interested stakeholders, the Council has provided recommendations for design and delivery improvements with respect to the Summary Plan Description (SPD), the Annual Funding Notice (AFN) and the Summary Annual Report (SAR), and observations regarding best practices for efficient and effective participant communications.

In a report to Department of Labor (DOL) Secretary R. Alexander Acosta, the Council notes that the general theme of its findings was the need to make retirement disclosures more understandable and useful for participants and to organize information within the required disclosures to reflect life events so that information is available as the need arises. In addition, witnesses highlighted the additional need to strike a balance between providing too little information for participants to gain an adequate understanding of what the disclosure is trying to convey and providing too much information, which can become overwhelming and confusing.  

For example, the Council says, the intended purpose of the SPD is to provide summarized, accessible and reliable information to participants about their plan. However, several witnesses testified that the SPD, in its current form, contains far too much detail for a summary document. The Council proposes to address these objectives through the development of an alternative means of compliance by which the introductory portion of the SPD–referred to as the “Quick Reference Guide”–would be delivered annually to participants automatically, and the entire SPD or any full part of the SPD would be made available upon request. The Quick Reference Guide would be tailored around life event triggers, and would provide answers to basic questions about the plan.

With respect to defined benefit (DB) plan disclosures, the Council focused specifically on the single-employer AFN, a complex multi-page disclosure containing detailed technical information about a defined benefit plan’s funded status. Based on witness testimony, the Council drafted a modified model single-employer AFN that reduces the overall size of the document and reorganizes the content with key information and a brief summary upfront and all other remaining information contained in an appendix.

While the AFN replaced the SAR disclosure requirement for DB plans, the SAR is still required for defined contribution (DC) plans. The Council heard from most witnesses that the SAR does not provide DC plan participants with helpful information about their own benefits. The Council recommends creating an alternative means for compliance by allowing plan administrators to provide a simple notification to participants about the availability of the annual Form 5500, including instructions for how to access that filing, either as a stand-alone notification, or included as a part of other mandatory disclosure(s), such as the SPD “Quick Reference Guide.”

“With these changes, the Council believes that these disclosures will be simplified and streamlined for plan participants, sponsors and administrators without sacrificing the quality of information that participants and other users of these mandatory disclosures receive,” the report says.