Compliance January 19, 2024

DOL Proposes Rule on Auto-Portability

The proposal would permit providers to charge fees for auto-portability services.

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The Department of Labor has proposed a regulation that would permit auto-portability providers to charge a reasonable fee for transferring retirement savings from an individual retirement account to a new Employee Retirement Income Security Act retirement plan.

Under Section 304 of the SECURE 2.0 Act of 2022, sponsors may distribute the account balance of an inactive participant to an IRA if the balance is $7,000 or less. The proposed regulation would codify Section 120 of SECURE 2.0, which permits the balance of such an IRA to then be transferred to a plan in which that participant is now active.

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In other words, if a participant leaves one employer, and their retirement plan savings are transferred to an individual retirement account, Section 120 permits that money to be moved to their new employer’s plan. The provision is intended to reduce leakage of retirement plan assets.

The proposed regulation permits service providers making such transfers to charge a reasonable fee. The imposition of the fee has certain requirements outlined in the proposal, such as prohibition of a liability waiver for an improper transfer.

The comment period for the proposal will remain open for 60 days after it has been entered into the Federal Register.

 

 

Compliance January 19, 2024

Regulators Seek Comment on ERISA Disclosure Requirements

The IRS, PBGC and EBSA are accepting suggestions on how to simplify disclosures to benefit fiduciaries and participants.

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The Employee Benefits Security Administration, IRS and Pension Benefit Guaranty Corporation issued a request for information on Friday, seeking advice on how to improve the reporting and disclosure regime for retirement plans governed by the Employee Retirement Income Security Act.

Section 319 of the SECURE 2.0 Act of 2022 requires the three agencies to publish a report by December 29, 2025, on improvements that can be made to retirement disclosures by plan sponsors and fiduciaries acting on their behalf. This RFI, with a 90-day comment period that commences when it is entered into the Federal Register, will be used to inform that report.

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The final report “will include recommendations on consolidating, simplifying, standardizing, and improving” the current disclosure regime. The regulators will aim to both reduce compliance burdens for plan sponsors and ensure plan participants’ receipt and understanding of the information “they need to monitor their plans, prepare for retirement, and get the benefits they have earned.”

According to the RFI, commenters should not make recommendations on how to improve Form 5500 because it already has an annual review and comment process. Instead, commenters should focus on areas related to participant comprehension and overall regulatory burden on sponsors. Those areas include:

  • The number, timing and content of participant disclosures, all factors that influence participant understanding;
  • Issues related to foreign languages, physical access and physical retention of disclosure documents and participant engagement with disclosures; and
  • Feedback on how to collect participant contact information and how to most effectively deliver documents.

On the compliance side, the RFI asks for feedback on the cost of reporting and disclosure; timing and frequency of reports; the clarity of reporting requirements; the necessity of reporting certain material; and improving agency assistance with filing.

The agencies included instructions on how to submit comments, which will be received by all agencies, according to the alert, so commenters should avoid sending duplicates.

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