Employee Benefits Legal Blog : Employee Benefits Lawyer & Attorney : Fox Rothschild Law Firm : Health Care, Retirement, ERISA : Philadelphia, New York, Northeast

The Pension Protection Act ("PPA") created a number of notice and reporting requirements, and plan sponsors are starting to send out various notices to participants.  The Department of Labor ("DOL") is starting the process of issuing guidance and coming into its own compliance obligations.  But I think there is one provision that might have been overlooked because of the timing of the requirement.

The PPA requires that defined benefit plans must disclose actuarial information related to the funding status of the plans.  The PPA provides that this information must be posted on the employer’s intranet for all plan years beginning after December 31, 2007.  This would mean that the 2008 5500, normally due by October 15, 2009, should be posted now (assuming it was filed).  Employers that sponsor calendar-year defined benefit pension plans are now required to post the actuarial information included on the 2008 Form 5500.  Of course, this requirement only applies to employers who maintain an intranet site for employee communications and does not obligate employers to create such an intranet site.  So if you have a company intranet website, and a defined benefit plan, this requirement applies to you. 

The new rules provide that the information that must be posted is the identification, basic plan information and actuarial information included in the annual report.  It must be filed with the DOL (electronically) and must be available on the employer’s intranet site.  It does not appear that the statute obligates employers to post the entire 5500 including all schedules.  Rather it appears to be limited to the identification information in Part 1, basic plan information from Part 2, and the actuarial information in Schedule SB.  So while it would seem that service provider information on Schedule C might be relevant, it is not required to be disclosed.

Unfortunately the DOL has provided no guidance with respect to when employers must post the plan information, or in what format it must be posted.  However, the DOL has 90 days to post their version of the filing under the new rules, so it is probably reasonable to infer the same 90 days would apply to an employer.  Most likely, an employer can post the filing as a .pdf document and would be in compliance but there is nothing formal on that issue. 

The PPA also made some other changes to participant disclosure requirements for defined benefit plans.   One significant change is that it eliminated the obligation to provide summary annual reports.  However, it replaced that obligation with the 5500 posting requirement outlined above, and an annual funding notice requirement that describes the funding status of the plan.  So for employers, not only do we have to send notices regarding funding status, but we have to post the 5500.  Remember, this is for defined benefit plans, not defined contribution plans.

Granted, this posting requirement is not an epic change in comparison to some of the other requirements of the PPA.  But for plan sponsors committed to full statutory compliance, this is one that should not be overlooked.

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Whenever I consider trying a new restaurant, I check to see about reservations.  Some places list them as "preferred," "required," "suggested" or "not taken."  Even establishments that require reservations may not really require them, but the thought of having to plan in advance sort of kills the adventure of changing plans.  Well, when it comes to administration of benefit plans, reservations are not only a good thing, they are absolutely required.

In this case, I am referring to reservation provisions in plans that allow the plan administrator to suspend, modify, amend or terminate any particular plan or benefit provided thereunder.  A well-drafted plan document (and corresponding summary plan description) will include plain language reserving the right of the sponsor to change the plan and modify benefits which then allows for a defense to claims that a particular benefit is guaranteed to participants.  The general rule is that for a plan to be able to change things, it has to tell participants that it has the ability to make changes.

Recently, the U.S. District Court for the Southern District of Iowa looked at a case where a class of retirees claimed that their former employer violated ERISA by amending their health insurance plan to eliminate certain medical benefits.  The retirees claimed that their right to the benefits was "vested" because they believed it was promised they would never lose benefits.  After trial, the Court ruled that the existence of a provision in the company plan providing that it could be amended or terminated at any time acted as a bar to any claim that the benefits could never be modified.  If a plan specifically reserves the right to change, then it can't be denied the ability to change.  See Brubaker v. Deere & Co., 08-CV-00113.

A reservation provision does not automatically provide an unfettered ability to modify plans.  Certainly there are numerous cases providing that separately bargained agreements or contracts can provide a specific limitation to the ability of a sponsor to amend a plan (like collective bargaining agreements or supplemental retirement programs).  But reservations provisions do provide some measure of protection to plan sponsors from general claims that amendment is prohibited.  At a time when many employers are looking at changing benefit plan structures to control costs, I would certainly recommend checking first to see if the plan has reserved the right to make the changes in advance of any decision to cut benefits.  And if your plan does not include such a provision, it should be amended to protect the sponsor going forward.

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In late 2008, Congress passed the Worker, Retiree and Employer Recovery Act ("WRERA").  It included a waiver of required minimum distributions (RMDs) for retirement plans for calendar year 2009.  In some situations, RMDs were made anyway, either because plan administrator were not prepared to make changes or they were concerned about sticking closely to plan language.  Fortunately, the IRS has issued come guidance on how to handle the situation.  Notice 2009-82 provides relief for people who have already received a 2009 RMD this year.  Individuals now generally have until the later of Nov. 30, 2009, or 60 days after the date the distribution was received, to roll over the distribution.

Remember, generally, a required minimum distribution is the smallest annual amount that must be withdrawn from an IRA or an employer’s plan beginning with the year the account owner reaches age 70½.  The 2008 law waives required minimum distributions for 2009 for IRAs and defined contribution plans (such as 401(k)s) and allows certain amounts distributed as 2009 RMDs to be rolled over into an IRA or another retirement plan. 
 
The notice also provides guidance for retirement plan sponsors.  It contains two sample plan amendments that plan sponsors may adopt or use to amend their plans to either stop or continue 2009 required minimum distributions.  Both sample amendments provide that participants and beneficiaries can choose to receive or not to receive 2009 required minimum distributions.  Also, both sample amendments allow the employer to offer direct rollover options of certain 2009 required minimum distributions.  Plan sponsors may need to tailor the sample amendment to their plan’s particular terms and administration procedures and must adopt the amendment no later than the last day of the first plan year beginning on or after Jan. 1, 2011 (Jan. 1, 2012 for governmental plans).

Notwithstanding the amendment, employers must decide what to do about RMDs before November 30, 2009.  Employers must decide whether to (1) suspend all RMDs for 2009 unless the participant affirmatively requests the distributions, (2) distribute all RMDs unless the participant affirmatively requests a waiver, or (3) continue RMDs for 2009 in accordance with the existing plan provisions without any participant choice.  Plan must be operated in accordance with the administrative procedures after November 30, 2009

So the action plan would be as follows:

1. Decide your administrative option
2. Select the Appropriate Amendment (if you are making a change)
3. Notify the Participants

Note that there is no inidication that RMD waivers will be permitted for 2010.

If you have questions about RMDs and your retirement plan, please contact a Fox Rothschild attorney for assistance.

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