Compliance June 10, 2011

Nonprofit Weighs in on Electronic Disclosure Debate

June 10, 2011(PLANSPONSOR.com) The Pension Rights Center, a nonprofit consumer rights organization, believes that current safe harbor rules balance the interests of participants and beneficiaries with the interests of efficient plan administration.
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According to a recent press release, in its letter to the Employee Benefits Security Administration (EBSA), the Center expressed its belief that “the safe harbor should be strengthened by requiring that participants affirmatively consent to the electronic delivery of a Summary Plan Description or the Periodic Pension Benefit Statement, even for employees who work with computers daily.”

The Center pointed out that for individual account plans, the Department of Labor’s (DoL) disclosure rules do not require all investment-related information be delivered individually to participants. The final regulations for fee disclosure to participants use a layered approach to disclose investment information so that supplemental investment information may be presented on a website. The Center recommends that paper copies be provided upon request.

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The Center’s second point, the release stated, was that electronic disclosure should not be the exclusive means of reducing the burden of disclosure requirements for plan administrators. The Center has previously testified that use of model notices and standard language, combining disclosure notices, and tailoring disclosure requirements to the specific notice might be ways to streamline disclosure requirements.

Lastly, the Center stated that email is not the only form of electronic communication that should be addressed. “It is our view that required pension disclosures cannot be delivered in an understandable manner by voice mail nor are most participants able to record or otherwise retain copies of these disclosures for future reference,” the Center wrote in its letter.  “The Pension Rights Center recommends that the Department of Labor adopt a rule prohibiting use of any voice delivery technology to provide required disclosures.”

The Pension Rights Center’s complete letter is available here.

-Nicole Bliman

Compliance June 10, 2011

Solis Files Brief with US Court of Appeals in McCravy Case

June 10, 2011(PLANSPONSOR.com) - Secretary of Labor Hilda Solis has filed a brief asking for a rehearing and reversal of an appellate panel's ruling that a “surcharge” is not an available remedy under Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA).
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The amicus brief was filed with the U.S. Court of Appeals for the Fourth Circuit on May 31. In it Solis explained how the appellate panel relied on the Supreme Court’s decisions in Mertens v. Hewitt Associates and Great-West Life & Annuity Insurance Co. v. Knudson, and found that section 502(a)(3) of ERISA does not allow the court to surcharge Metropolitan Life Insurance Co. (MetLife) for the life insurance proceeds that Debbie McCravy would have received from MetLife if not for its alleged fiduciary breaches.

However, Solis pointed out, on the same day the panel issued its decision, the Supreme Court voted on CIGNA Corp. v. Amara. “Contrary to the panel’s decision holding that surcharge is unavailable, the Supreme Court’s decision in CIGNA states that surcharge is an available remedy under section 502(a)(3). The CIGNA opinion explains that surcharge, or monetary compensation by a fiduciary for loss resulting from the fiduciary’s breach of duty, was a ‘traditional equitable remedy’ and thus falls within the ‘category of traditionally equitable relief’.”

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 “As CIGNA now makes clear,” Solis concluded, “appropriate equitable relief under ERISA Section 502(a)(3) includes relief that makes injured participants and beneficiaries whole and thus permits the court to surcharge MetLife for the insurance proceeds that McCravy would have received but for the alleged breaches of fiduciary duty.”

The full text of the brief is available here.

 

-Nicole Bliman

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