ASPPA Calls for Consolidated, Streamlined Plan Participant Disclosure
ARLINGTON, VA, May 3, 2007 -- In testimony today before the House Education and Labor Committee's Subcommittee on Health, Education, Labor and Pensions, the American Society of Pension Professionals & Actuaries (ASPPA) called for consolidated, streamlined disclosure of important retirement plan information to plan participants.
"The Pension Protection Act of 2006 (PPA) has resulted in what ASPPA describes as the Great Flood of 2006—a deluge of new disclosure rules that make victims of the millions of retirement plan participants who are already overwhelmed with information," said Sal Tripodi, ASPPA's President-Elect. "As participants drown in a sea of disclosure, plan service providers paddle upstream to fulfill these new mandates, trying to make sure the law's intent is carried out."
Pointing out that much of the information required in the many duplicative and burdensome disclosure requirements is already contained in a participant's summary plan description (SPD), ASPPA recommended that all the disclosure requirements be consolidated into a standard document—a plan operating manual (POM). The POM would serve as a single source for all relevant plan information. It would be written so that an average participant could easily understand it. When a targeted disclosure is needed, participants would be notified and referred to the relevant sections of the POM for review, rather than being provided a full-blown notice.
Many plan participants simply ignore overly complex, lengthy and numerous disclosure notices, thus undermining the purpose of the disclosures. Worse, Tripodi said, the many burdensome and duplicative disclosure requirements wind up costing plan participants unnecessary extra fees charged to their plan and/or individual accounts within the plan.
"For example," Tripodi explained, "assume a 401k plan with ten participants. A single disclosure would easily cost $6 per participant. The PPA-mandated quarterly benefit statements plus an annual vesting statement-a total of five disclosures per year-would cost $30. If the plan uses the 401k nondiscrimination safe harbor, automatic enrollment and a qualified default investment alternative, there are three more disclosures, raising the cost to $48 per participant. For a participant making $40,000 per year who saves 5% ($2,000) of pay in a 401k plan, this adds up to almost a 2.5% charge just for disclosures. This doesn't make sense."
The POM would significantly lessen this substantial cost burden imposed by the new disclosure requirements, and, more importantly, increase the usefulness of necessary plan information to plan participants, Tripodi said.
Tripodi also testified on the importance of other PPA corrections, including critical issues involving the PPA benefit statement provisions that plan sponsors and administrators are struggling to comply with, a deduction rule correction to encourage full funding of defined benefit plans, and the need for delayed effective dates on some of the PPA provisions. The full text of this testimony can be found on the ASPPA website at www.asppa.org .
About ASPPA
ASPPA, a national organization made up of more than 6,000 retirement plan professionals, is dedicated to the preservation and enhancement of the employer-sponsored retirement plan system. ASPPA is the only organization comprised exclusively of pension professionals that actively advocates for legislative and regulatory changes to expand and improve the employer-sponsored pension system. In addition, ASPPA offers an extensive credentialing program with a reputation for high-quality training that is thorough and specialized. ASPPA credentials are bestowed upon administrators, consultants, actuaries and other professionals associated with the retirement plan industry.
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