Reporting & Disclosure

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Proposed Regulation on Cafeteria Plans Lays Out Document Requirements.
Managing Benefits Plans; no08-12 pp 2-3 Dec 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Speakers at an American Law Institute-American Bar Association audioconference outlined cafeteria plan documentation requirements in IRS proposed regulations. The proposal, which makes no allowance for correcting documents, must specify benefits, participation requirements and eligibility rules, method for and maximum amount of employer contributions and the plan year. Sponsors can use a wrap document with cross references to other documents. The document must fully describe contributions governing health savings accounts if offered and let plan members change contribution elections. Rules governing flexible spending accounts must be explained, as well as grace period arrangements if available.
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When to Serve Notice: Notice Requirements Affected by the Pension Protection Act of 2006.
Pett, Craig R.; Prather, Andrea; MacKay, Blake C.; Woods, Kyle; Benefits Law Journal; v21 no4 pp 79-92 Winter 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Pension Protection Act (PPA) introduced requirements for notifications and reporting on a range of pension and benefits topics. In some cases, existing rules for notices were revised or withdrawn, and many other existing rules remain that do not pertain to the PPA. An extensive chart provides details about specific notices, their contents, required recipients, timing and the results of noncompliance with the notification rules.
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Disclosure of Termination Information: Final Rule.
Federal Register; v73 no223 pp 68333-68339 Nov 18, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The PBGC has issued a final rule implementing amendments to ERISA made by the Pension Protection Act of 2006. Plan administrators and sponsors must now disclose to affected parties information submitted to the PBGC in connection with a distress termination filing or termination initiated by the PBGC. Further, the PBGC must disclose the administrative record in a PBGC initiated termination. This rule is effective December 18, 2008.
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Plaintiff Detrimentally Relied on Inaccurate Pension Benefit Representations.
Benefits & Compensation Legal & Legislative Reporter; v42 no11 pp 8, 10 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The plaintiff in Pell et al. v. E.I. DuPont de Nemours & Co. et al. worked for one company since 1971 and transferred to the defendant successor company in 1983. He was repeatedly assured orally and by written documents that his pension would be calculated on service since 1971. When he asked about his pension benefit value in 2000, calculations were based on a period 1.475 years short. The plan administrator denied additional benefits, but the district court ruled for the plaintiff. On appeal, the Third Circuit found the plaintiff had sufficient reason to expect benefits calculated from 1971 as repeatedly promised. The court ruled the defendant was liable under equitable estoppel and must pay the withheld amount.
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Reporting and Disclosure Under PPA : New Challenges for Multiemployer Defined Benefit Plans.
Endick, Jeffrey S.; Benefits & Compensation Digest; v45 no11 pp 1, 13-17 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The PPA dramatically expands the information that multiemployer defined benefit funds must provide to participants, as well as to participating unions and employers. Particularly for funds with funding problems, the required disclosures could cause concern among participants and requires a proactive and comprehensive communications strategy. The revised financial disclosure requirements also raise issues that should be addressed with investment managers and consultants.
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UK Pension Provision: Part 1: Expatriates Working Outside the UK.
Bennett, Anne; Hunt, Matthew; Benefits & Compensation International; v38 no4 pp 3-6 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Two laws passed in 2004 have had profound impact on pensions for expatriates. The Finance Act 2004 replaced the complicated rules for pension schemes registered in the United Kingdom covering nonresidents with a simplified system that effectively allows schemes registered in the U.K. to cover anyone. The Finance Act also deferred tax deductions for U.K. companies making contributions to overseas pension schemes and simplified the rules for transferring U.K. benefits to an overseas scheme while increasing reporting requirements. The Pensions Act 2004 requires all defined benefit pension schemes operating between European Union countries to be fully funded at all times, a status few U.K. schemes can achieve.
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Statutory Exemption for Cross-Trading of Securities: Final Rule.
Federal Register; v73 no195 pp 58,450-58,459 Oct 7, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Employee Benefits Security Administration has issued a final rule on content requirements for written cross trading policies and procedures, as required under ERISA Section 408(b)(19). The Pension Protection Act of 2006 established Section 408(b)(19), which exempts the purchase or sale of a security between the plan and other accounts managed by the same manager if certain criteria are met. Among these criteria is the adoption of written cross trading policies and procedures intended to promote transparency and avoid conflicts of interest. The final rule is effective February 4, 2008.
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Say on Pay: Still Needed?
Dobson, Sarah; Canadian HR Reporter; v21 no16 pp 13, 18 Oct 6, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The demand for a firmer tie between executive performance and compensation is growing louder. In early 2008, 40 percent of shareholders of five Canadian banks voted for a say on pay. In September 2008, the Canadian Securities Administrators put out rules requiring companies to provide comprehensive and easily read details on executive pay, a move that may eclipse the shareholders' movement. It can be argued that shareholders lack information to judge compensation, the compensation committees handle pay rather than boards of directors and shareholders can vote directors out of office. But the shareholders' advisory vote sends a strong message on excessive executive pay.
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Labor Organization Annual Financial Reports for Trusts in Which a Labor Organization Is Interested, Form T-1: Final Rule.
Federal Register; v73 no192 pp 57,412-57,473 Oct 2, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The final rule from the Employment Standards Administration Office of Labor-Management Standards requires labor organizations to file a Form T-1 with annual receipts of $250,000 or more. The filing triggers for the form are a labor organization's appointment or selection of the majority of its board, whether alone or with other labor organizations, or making contributions to the trust greater than 50 percent of the trust's total receipts during the fiscal year. Exemptions include political action committees that file fund reports available to the public with federal and state agencies, political organizations that file reports under Section 527 of the IRS code and trusts that must file Form 5500 under ERISA.
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Unions: OLMS Issues Final Form T-1 Rule on Annual Financial Reports for Union Trusts.
Cinquegrani, Gayle; Daily Labor Report; no190 p A1 Oct 1, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A final rule from the DOL's Office of Labor-Management Standards (OLMS) requires labor unions with annual receipts of $250,000 or more to file a Form T-1. The form will disclose information about trusts in which the unions hold managerial control or financial dominance. The DOL says it hopes to deter future misuses of union trusts similar to those which have occurred in the past. The final rule goes into effect on January 1, 2009.
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FSCO Replaces Policy on Financial Statements.
MacDonald, Lesa; Canadian Benefits & Compensation Digest; v26 no5 p 6 Oct 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Effective May 15, 2008, the Financial Services Commission of Ontario issued a revised policy governing financial statements by pension plans and funds. The revision allows plans and funds to submit financial statements not prepared in accordance with generally accepted accounting principles in certain circumstances. Such statements, however, must conform to the standards described in the handbook of the Canadian Institute of Chartered Accountants. Plan sponsors are required to report on plan assets but not on liabilities, which are covered in other financial reports.
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Other Recent Decisions.
Benefits & Compensation Legal & Legislative Reporter; v42 no10 pp 15, 16 Oct 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Evans et al. v. Akers et al., two plaintiffs alleged the defendant breached fiduciary responsibility by keeping failing company stock in the employer pension plan. The First Circuit Appeals Court ruled the plaintiffs were plan participants with a colorable claim that their lump sum benefit distributions were shorted by imprudent fiduciary actions. In Gates v. UNUM Life Insurance Co., the plaintiff's denied long term disability was revisited through a Regulatory Settlement Agreement but again denied. The plaintiff sought statutory penalties when the defendant failed to provide requested written documents. The district court found the Agreement did not equate to an ERISA plan and chose not to enforce ERISA requirements. In Minnesota Power and Affiliated Companies Retirement Plan A et al. v. Capital Guardian Trust Co., the same court ruled the defendant had control over several plans. The plaintiff requested that the plans' accounts be liquidated and the assets transferred to another investment manager. The defendant was responsible as a fiduciary for delaying an asset transfer, resulting in significant financial loss by the plans.
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Plan Administrators' Year-End Tasks More Complex Than Ever.
Managing 401(k) Plans; no08-10 pp 1, 13-15 Oct 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to an American Law Institute-American Bar Association webcast, 401(k) plan administrators can expect significant changes for the 2009 plan year. The changes are largely due to IRS and DOL regulations implementing the Pension Protection Act of 2006. Sponsors must put in regulatory amendments annually, not at the end of a determination letter cycle. Among the changes for 2008 and 2009 are Internal Revenue Code Section 415 limits, the availability of automatic enrollment options and new DOL disclosure rules.
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Best Practices for Pay Statements.
Van Alstine, Steven; Canadian HR Reporter; v21 no15 p 32 Sep 8, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Canadian Payroll Association has best practices for payroll professionals in its Pay Statement Guidelines. The publication is a reference on recommended practices, procedures and formats and a benchmarking tool for internal assessment. The goal is to help practitioners achieve the highest quality and efficiency in service to clients. The best practices include recommendations for a communications plan, cost-effective electronic pay statements and related considerations, and strategies to protect individual confidential information.
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A New Track for Transitions.
Keefe, John; PLANSPONSOR; v16 no7 pp 35-36, 38, 42 Sep 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Pension Benefit Guaranty Corporation (PBGC) best practices recommendations for managers of portfolio transitions include documenting transition activity. The PBGC also recommends keeping transition activity separate from other business activity, documenting actual and potential conflicts of interest and disclosing relevant sources of transition revenue. Following the transition, all sources of revenue and how it was calculated and collected should be disclosed. Relationships with brokers and other third parties should also be revealed along with fee structures.
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A Primer in SAS 70 Reports.
Schmidt, Steven L.; ASPPA Journal; v38 no4 pp 14-15 Fall 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Plan service providers have much to gain by having a report they passed a Statement on Auditing Standards (SAS) 70 audit. The SAS 70 audit attests to a firms' internal controls governing all its operations, including important controls over information technology activities. The Type I audit identifies the controls without testing, while the Type II audit tests how well they work. The internal controls evaluated include the control environment, risk assessment, control activities, information and communication, and monitoring. External controls and additional user controls may also be included. A Type I audit can indicate weaknesses needing attention prior to the full Type II audit.
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A Summary of ERISA.
Purcell, Patrick J.; Staman, Jennifer; Journal of Deferred Compensation; v14 no1 pp 48-122 Fall 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Established in 1974, the Employee Retirement Income Security Act protects private sector employees' pension benefits, taking precedence over most state laws in the area. ERISA addresses specific employee rights, requirements for a plan to qualify for ERISA by the IRS and defines administrative requirements and responsibilities. ERISA also established the PBGC to protect pension benefits when a plan fails. Some of the key points in ERISA include plan funding requirements, fiduciary responsibility, employee rights to plan information, benefit accrual and vesting rules and preemption of state laws.
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Abusive Insurance and Retirement Plans.
Wallach, Lance; Journal of Accountancy; v206 no3 pp 34-36 Sep 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The IRS has long targeted abusive benefit plans designed to avoid taxes through Internal Revenue Code Section 419, though insurance plan promoters continue to devise variations and claim they are legal. IRS Notices 2007-83, 2007-84 and 2007-65 address cash value life and medical insurance, clarifying that premiums paid may be listed transactions subject to alternative tax treatment, regardless of some promoters' claims. Certified public accountants must be sure any tax return they prepare avoids such questionable elements and that those elements are fully disclosed and that they are more likely able to withstand IRS scrutiny than not. Both accountant and employer are liable to severe penalty for noncompliance.
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Administrative Aspects of Enhanced Fee Disclosure in 401(k) Plans.
Cline, J. Reed; Journal of Pension Benefits; v16 no1 pp 62-63 Autumn 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : It can be argued that the DOL's expanding requirements for plan information disclosure, especially regarding fees, will undermine the viability of participant directed plans. The disclosure requirements are complex and burdensome and lead to information overload, making participants fail to understand or totally ignore supposedly helpful communications. For plan sponsors, Form 5500 Schedule C and complying with ERISA Section 408(b)(2) add to the administrative burden. Service providers are unlikely to respond to requests for proposals without making up for their effort in higher costs. Trustee-managed pooled accounts or balance forward plans may be the only way out.
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Asset-Based Fees Under Attack: What Once Was May No Longer Be!
Witz, David J.; ASPPA Journal; v38 no4 pp 16-19 Fall 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : It was common practice to charge fees relative to the amount of plan assets under the asset-based model (ABM). The trend is toward a professional business model similar to a fee for service, irrespective of the asset total. Fees will be based more on the intellectual value of service. ERISA Section 408(b)(2) on full disclosure is likely to influence fees in a downward direction, and fiduciary responsibility may prompt plans to review fees paid in the past to recoup any deemed excessive. Fund management firms must focus on developing knowledge, problem solving and business efficiency while nurturing a high level of ongoing skill and talent to sustain and expand client relationships.
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Avoiding Prohibited Transactions in the Selection and Retention of Plan Service Providers.
Monnolly, Michael G.; McMahan, Sean K.; Employee Relations Law Journal; v34 no2 pp 38-50 Autumn 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : ERISA requirements have increased the scrutiny of payment and disclosures for plan expenses, making fiduciary compliance in selecting and retaining service providers even more important. The design and implementation of an impartial and extensive selection process can be the key to meeting those requirements. The selection plan should make it possible for the fiduciary to assess provider qualifications, quality of services provided and the appropriateness of the fees charged. The selection process must shun conflicts of interest, self dealing and other inappropriate influences.
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Caution Ahead! The Long and Winding Road to Fee Disclosure: What's in Store Under the DOL's Proposed Regulations and Legislative Proposals.
Mao, Emily; Smith, Carolyn; Benefits Law Journal; v21 no3 pp 20-53 Autumn 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In late 2007 the DOL proposed regulations on fee disclosures for defined contribution plan sponsors and participants, and there are three legislative bills on the issue. The proposed regulations and bills differ in the details of their approach to fee disclosure, what plans are covered, who is responsible for disclosing information and disclosure details included in contracts. Handling of bundled and unbundled services presents a major challenge, without even a definition of bundled service. Other points of difference include revealing conflicts of interest, penalties for failure to disclose and effective dates. The more detailed DOL proposals may well reach approval stage before the legislative bills.
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Corporate Governance in Europe: The Remuneration Committee and Disclosure.
Marchettini, Piero; Benefits & Compensation International; v38 no2 pp 3-12 Sep 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In 2008, Europe is reacting to a number of corporate governance and executive compensation scandals. Despite the diverse nature of these scandals, the typical response from shareholders is to demand greater accountability, judgment and transparency from board members. Best practices call for board members to involve themselves knowledgeably and responsibly in executive compensation, benefits and employment practices. Most corporate governance codes recommend that boards set up special remuneration committees to deal with executive compensation issues. Pay disclosure may be either a marketable advantage or a public embarrassment. The Institut Francais des Administrateurs has offered recommendations on the structure, membership, responsibilities of remuneration committees and nomination of corporate executive directors.
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Department of Labor Issues Q&As on Form 5500 Schedule C Reporting for 2009.
Brooks, Jennifer Dack; Journal of Pension Benefits; v16 no1 pp 43-44 Autumn 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Schedule C will require more complete disclosure of compensation of $5,000 or more for large plan service providers, starting with the 2009 plan year, reportable in 2010. The amount of detailed disclosure depends on whether compensation is direct or indirect. Direct compensation includes payments by a plan to a service provider from plan or individual accounts. Eligible indirect compensation includes fees and expenses reflected in the value of the investment and require written disclosure of services, amounts, and payer and recipient. The DOL published clarifying information on Schedule C on July 14, 2008, and offered transition relief for plans where providers have not given full information required.
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Department of Labor: New Disclosure Requirements.
Ferrera, Tess J.; Journal of Pension Benefits; v16 no1 pp 48-52 Autumn 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In July 2009, the DOL proposed regulations to increase information to be provided to plan participants. The proposal would make more transparent both direct and indirect compensation over $5,000 paid to service providers for large plans. The proposal would also clarify a reasonable arrangement between plan and vendor qualifying for a prohibited transaction exemption. The proposal puts the responsibility for disclosure on the provider. The DOL's proposal also requires disclosures to participants regarding plan expenses rising from administration and individual activity and addresses the frequency and extent of communications on investment performance.
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