ERIC Supports PBGC’s Efforts to Create Missing Participant Program for 401(k) and Similar Plans

The ERISA Industry Committee (ERIC), along with the Plan Sponsor Council of America (PSCA), and the U.S. Chamber of Commerce (Chamber) today submitted comments to the Pension Benefit Guaranty Corporation (PBGC) supporting the agency’s efforts to implement a missing participants program in 401(k) and similar plans.

The group letter was in response to a PBGC “Request for Information” (RFI) issued June 21 indicating that the agency is soliciting information about a new missing participant program for participants in certain terminating defined contribution plans. The Pension Protection Act of 2006 (PPA) directed the PBGC to create a program whereby plan administrators of defined contribution plans could transfer a missing participant’s benefits to the PBGC upon the termination of the plan.

In responding to a series of questions in the RFI, the letter explained that the group believes there would be significant demand for a missing participants program, as plan sponsors are frequently unable to find IRA providers to accept smaller account balances, particularly those with less than $1,000. ERIC, PSCA, and the Chamber recommended that the PBGC create a program whereby fiduciaries of terminating plans that transfer the accounts for missing participants to the PBGC can be confident that:

1. the funds will be handled appropriately; 
2. the account will be charged no more than reasonable fees; 
3. the participant (once found) will be able to obtain an accounting of the manner in which their funds have been handled by the PBGC; and 
4. the administrative burden is not significant. 

The group recommended that any program be optional, as provided in the PPA.

For a copy of ERIC’s press release, click here.
For a copy of the comment letter, click here.

ERIC Submits Additional Information on Reportable Events Hearing to PBGC

The ERISA Industry Committee (ERIC) has submitted a letter to the Pension Benefit Guaranty Corporation (PBGC) in response to questions posed by the PBGC at the recent hearing on the reportable events proposed regulations. 

This letter supplements ERIC's prior comment letter and testimony on this issue. 

In particular, ERIC's recent letter discussed in further detail that:

• Companies will need to restructure their credit agreements as a result of the proposed regulations;
• Many financially sound companies secure their receivables to reduce financing costs;
• Complying with the proposed regulations would be costly for companies;
• 98% of the largest U.S. defined benefit plans will not qualify for the safe harbor for plans that are 120% funded on a premium basis; and
• The PBGC should not create a new approach whereby it uses a limited number of factors in the company safe harbor.

The letter responding to the PBGC’s questions can be accessed by clicking here. ERIC's June 3rd comment letter is available here and our June 18th testimony is available here.

ERIC Files Comment Letter on Minimum Value Proposed Regulations

The ERISA Industry Committee (ERIC) recently filed a comment letter on the minimum value proposed regulations.

Our significant recommendations to the IRS included:

• All wellness incentives should be taken into account for affordability purposes, not just those related to tobacco use.
• A safe harbor should be available for plans that have copayments.
• If included in the final regulation, the IRS should provide statutory justification for the assertion in the preamble that employers may not cover employees in an employer-sponsored health plan unless the employee may opt out of coverage. 
• Stand-alone HRAs should not be considered minimum essential coverage for pre-Medicare eligible retirees under specified circumstances.

ERIC’s press release is available here.

ERIC’s comment letter is available here.

ERIC Explores Lifetime Income Proposal

We hope you were able to join us for today's call on lifetime income disclosures on benefits statements.The Department of Labor (“DOL”) has issued an advanced notice of proposed rulemaking (ANPRM) that would require benefit statements for defined contribution plans to include the participant’s account balance and an estimated lifetime stream of payments. An “ANPRM” is a “pre-rule” or a step an Agency can take prior to issuing proposed regulations.

In its ANPRM, the DOL is considering various alternatives to regarding the methodology of disclosing estimated lifetime streams of payments, including requiring plans to:

• Convert the participant’s current account balance to an estimated lifetime income stream of payments, assuming the participant had reached normal retirement age under the plan as of the date of the benefit statement. 
• Show the projected account balance, as well as the lifetime income stream generated by it for participants who have not yet reached normal retirement age. The participant’s current account balance would be: (1) projected to normal retirement age, based on assumed future contribution amounts and investment returns; and (2) then converted to an estimated lifetime income stream of payments, assuming that the person retires at normal retirement age. 
• Include both Options 1 and 2 as estimated monthly payments based on the expected mortality of the participant or beneficiary. If the participant has a spouse, the projections would need to be based on the joint lives of the participant and his/her spouse. 

During today's call, we discussed the proposal and what it might mean for our members. If you missed the call, the materials are available here.

The DOL had already issued a Request for Information (RFI) in 2010. Thus, this is the second round of questions asked by the DOL on this issue and is based on the responses it received to the RFI. ERIC has previously responded to the DOL’s Request for Information (available here) and testified on this issue (available here). In our response to the RFI, we encouraged the DOL to establish a website that allows individuals to make such estimates based on their individual circumstances and opposed a mandated illustration on benefit statements.

During the call, Kathryn Ricard and Debra Davis of ERIC provided an overview of the ANPRM and ERIC’s position on the RFI and Seth Safra of Covington & Burling highlighted particular concerns for large employers.

If you're an ERIC Member, please be sure to let us know what you think of the DOL's proposal by contacting Kathryn Ricard or Debra Davis.

ERIC Recommends Revisions to Shared Responsibility Proposed Regulations

The ERISA Industry Committee (ERIC) filed comments today urging the Treasury Department and Internal Revenue Service (the Agencies) to revise the shared responsibility proposed regulations to better accommodate the implementation challenges and administrative complexities faced by large, multinational companies with diverse workforces.… More