The 2015 ERISA Advisory Council plans to build on a 2013 effort by devising new draft model notices and disclosures for lump-sum pension distribution offerings to participants and retirees.
Instances of pension risk transfer — often referred to as “derisking,” from the plan sponsor’s point of view — are on the rise among single-employer defined benefit pension plans. Such lump-sum offers or sales of pension obligations to annuities providers shift the risk and expense of lifetime retirement benefits from the plan to the participants.
The 2015 ERISA Advisory Council, a 15-member body that meets regularly to provide advice to the U.S. Department of Labor on policies and regulations affecting employee benefit plans governed by ERISA and to submit recommendations, said in late April it would build on the 2013 council’s recommendation that participant disclosures about lump-sum risk transfers be improved.
Specifically, the 2013 council urged plan sponsors to improve the derisking process for participants by limiting election windows to no less than 90 days and including “relevant information to enable a participant to make an informed election” about issues such as potential impact of tax penalties, whether an early retirement subsidy is included in the lump sum and comparing the lump sum to other benefits under the plan.
An announcement from the council’s issue chair, James Singer, said the current council will focus on information needed by participants to make informed decisions when faced with lump-sum and insurance annuity risk transfers. It also will share best practices for plan sponsors in communicating that information. Ultimately, the council plans to offer DOL draft model notices and disclosures that can be used by plan sponsors, participants and the public, the announcement said.
To read the complete story on Thompson’s HR Compliance Expert, click here.