NEWSLETTERS

Update On PPA Notice

In August 2006, the Pension Protection Act of 2006 (PPA) was signed into law.  The PPA included several significant provisions affecting defined contribution plans and 401(k) plans. 

One of the biggest changes was the requirement to provide quarterly benefit statements and notices to all participants who select their own investments.  This requirement applies to all plans in which the participants can select their own investments for any portion of their money.

This requirement became effective for the first plan year beginning after December 31, 2006.  Thus, for calendar year plans, the requirement was effective for the first quarter ended March 31, 2007.

The Pension Protection Act requires the benefit statements to include the following information:

•         The participant’s total account balance based on the latest available information.

•         The participant’s vested account balance.

•         The value of each investment in the participant’s account. 

•         An explanation of any permitted disparity used in the plan.

•         An explanation of any restrictions on the participant’s investment direction.

•         Information regarding diversification of investments.

•         Reference to the Department of Labor’s website for other investing information.

As of April of 2007, investment companies did not have the above requirements incorporated into their quarterly participant benefit statements.  Administrative Retirement Services, Inc. therefore provided a Retirement Plan Notice and a Multiple Document Notice that should be distributed to plan participants to satisfy the requirements.  These two notices should be distributed within 45 days following the close of each calendar quarter.

Products provided by ING and John Hancock have now incorporated all of the above requirements into their quarterly statements.  If your plan assets are invested fully with ING or John Hancock products, you do not need to distribute the Retirement Plan Notice or Multiple Document Notice any longer.

American Funds and Hartford/Sun Life incorporate vesting into their quarterly statements, but are missing some of the requirements listed.  If your plan assets are invested fully with American Funds and Hartford/Sun Life products, you only need to distribute the Retirement Plan Notice ongoing. 

Plans with investments that are completely trustee or employer directed must provide a benefit statement to all participants on an annual basis.  Continue to distribute the last current annual benefit statement to all participants within 45 days following the close of each calendar quarter.

If your plan assets are invested with any other investment company, continue to distribute the Retirement Plan Notice and the Multiple Document Notice to your participants within 45 days following the close of each calendar quarter.  

Please be reminded that the penalties for not providing the benefit statements and required information on a timely basis are severe, up to $110 per person per day.

Please contact Administrative Retirement Services, Inc. if you are not certain what to distribute to your participants to satisfy PPA for your plan.

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