2023-17249. Request for Information-SECURE 2.0 Reporting and Disclosure

AGENCY:

Employee Benefits Security Administration, U.S. Department of Labor.

ACTION:

Request for information.

SUMMARY:

The Employee Benefits Security Administration of the U.S. Department of Labor (the Department) is publishing this Request for Information to solicit public feedback and to begin developing a public record for a number of provisions of Division T of the Consolidated Appropriations Act, 2023, (Dec. 29, 2022) (referred to as the SECURE 2.0 Act of 2022 or SECURE 2.0) that impact the reporting and disclosure framework of the Employee Retirement Income Security Act of 1974 (ERISA). Several sections of SECURE 2.0 establish new, or revise existing, ERISA reporting and disclosure requirements, in some cases also requiring that the Department undertake a review of existing or new requirements and submit reports to Congress on the Department's findings. The Department believes that it will be helpful to initiate several of these actions, given their commonality in affecting reporting of information to the Department and the disclosure of information to retirement plan participants and beneficiaries, in this Request for Information. Any later action by the Department on these SECURE 2.0 provisions, whether rulemaking or otherwise, will be better informed by responses to this Request for Information.

DATES:

To be assured consideration, comments must be received at one of the following addresses no later than October 10, 2023.

ADDRESSES:

You may submit written comments to the Office of Regulations and Interpretations, identified by RIN 1210–AC23, to one of the following addresses:

• Federal eRulemaking Portal: www.regulations.gov. Follow the instructions for submitting comments.

• Mail: Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N–5655, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, Attention: Request for Information—SECURE 2.0 Reporting and Disclosure.

Instructions: Persons submitting comments electronically are encouraged not to submit paper copies. Comments will be available to the public, without charge online at www.regulations.gov, at www.dol.gov/​agencies/​ebsa, and at the Public Disclosure Room, EBSA, U.S. Department of Labor, Suite N–1513, 200 Constitution Avenue NW, Washington, DC 20210.

Warning: Do not include any personally identifiable or confidential business information that you do not want publicly disclosed. Comments are public records and can be retrieved by most internet search engines.

FOR FURTHER INFORMATION CONTACT:

Kristen Zarenko, Office of Regulations and Interpretations, EBSA, Department of Labor, (202) 693–8500.

SUPPLEMENTARY INFORMATION:

Background

On December 29, 2022, the Consolidated Appropriations Act, 2023, H.R. 2617 was enacted. Part of this Act, SECURE 2.0, includes provisions amending ERISA and the Internal Revenue Code (the Code). Some of the provisions in SECURE 2.0 require regulations or other guidance for implementation. Other provisions direct the Department to undertake a review of certain statutory and regulatory requirements and submit reports to Congress on the Department's findings.

This Request for Information (RFI) focuses on certain SECURE 2.0 sections that principally impact, directly or indirectly, ERISA's reporting and disclosure requirements. Not all of the SECURE 2.0 provisions that affect the reporting and disclosure framework of ERISA are covered in this RFI, generally because the Department has already started or intends to initiate separate notice and comment rulemaking, actions, issue guidance, request additional information, or release reports, as appropriate, to implement these other provisions. For example, the changes to ERISA's audit requirements by section 345 of SECURE 2.0 were implemented through a recent rulemaking relating to annual reporting requirements under ERISA.^[1] In addition, the Department published a solicitation for comment on the effects of section 305 of SECURE 2.0 on the Department's Voluntary Fiduciary Correction Program on February 14, 2023.^[2]

Another example of a SECURE 2.0 provision that affects reporting and disclosure but which is not addressed in this RFI is section 319 of SECURE 2.0. This provision directs the Department, in consultation with the Department of the Treasury (Treasury Department) and the Pension Benefit Guaranty Corporation (PBGC), to review each agency's existing reporting and disclosure requirements for retirement plans. After this review, and in consultation with a balanced group of participant and employer representatives, the agencies must report to Congress on the effectiveness of these reporting and disclosure requirements, including recommendations to consolidate, simplify, standardize, and improve such requirements. Rather than dealing with the specific substance of individual reporting and disclosure requirements under ERISA and the Code, the section 319 review is expansive in scope and calls for more generalized questions about how to best communicate information—information that can be quite complex—to the government and to workers of widely variable capabilities, enabling workers to obtain, understand, and use information about their plans and retirement. Further, these themes are to be explored in the context of a significant number of reporting and disclosure requirements under the jurisdiction of three different agencies. The Department currently intends to move forward by formally soliciting public input on the section 319 project, in coordination with the Treasury Department and PBGC, but as part of a rulemaking initiative separate from this RFI.

Apart from these exceptions, the Department believes that it will be helpful to initiate progress on the specific SECURE 2.0 items set forth below in this RFI by expeditiously obtaining feedback from a diverse set of stakeholders from the earliest stages of the process and building an initial public record. This feedback will inform more specific, detailed rulemaking or other guidance on such provisions in the future, including completion of multiple reports to Congress, as required by SECURE 2.0. Moving forward, as relevant, the Department will continue to consult with other agencies, including the Treasury Department and PBGC.

II. Request for Information—SECURE 2.0 Reporting and Disclosure Provisions

The purpose of this RFI, as explained above, is to inform future action by the Department on the following SECURE 2.0 mandates related to ERISA's reporting and disclosure provisions. The Department invites comments, including relevant data, if available, from all interested stakeholders. The RFI includes questions about a number of distinct SECURE 2.0 provisions. Commenters need not answer every question, but are encouraged to identify, by number, each question addressed.

A. Pooled Employer Plans. Section 105 of SECURE 2.0 amended ERISA section 3(43)(B)(ii), defining a “pooled employer plan” (PEP), to provide that the terms of the plan must “designate a named fiduciary (other than an employer in the plan) to be responsible for collecting contributions to the plan and require such fiduciary to implement written contribution collection procedures that are reasonable, diligent, and systematic[.]” This clarification as to which persons may be designated as a named fiduciary for this purpose is effective for plan years beginning after December 31, 2022. The Department intends to update the Form PR and Instructions (Registration for Pooled Plan Provider), as necessary, to reflect this amendment for purposes of reporting the designated named fiduciary.

Section 344 of SECURE 2.0 also directs Department action on the topic of PEPs. Specifically, section 344 directs the Department, not later than five years after enactment, and every five years thereafter, to submit a report to Congress, and make publicly available on a website, the Department's findings from a study of the PEP industry, including recommendations on how PEPs can be improved, through legislation, to serve and protect retirement plan participants.^[3] The Department is in the preliminary stages of planning such a study and anticipates using data collected from the Form PR and the Form 5500 Annual Report to assist in preparing this report. As part of this RFI, the Department is requesting commenters' ideas about how to construct such a study effectively in response to this directive and whether, and what, additional information the Department should focus on to help achieve the stated objectives of the study to improve PEPs and subsequent reports to Congress. In addition to general feedback on the methodology and scope of the required study, the Department seeks input on the specific issues set forth below.

Question 1: What guidance, if any, for purposes of reporting on Form PR or otherwise, do pooled plan providers, fiduciaries, trustees, or other parties need to implement the revised definition in ERISA section 3(43)(B)(ii) effectively?

Question 2: In addition to the Form PR and the Form 5500 Annual Report, what are other data sources the Department could use to collect data on the topics enumerated in SECURE 2.0 section 344(1), e.g., the fees assessed in such plans, or the range of investment options provided in such plans?

Question 3: The Department interprets the language in section 344(1)(C) of SECURE 2.0 requiring identification of “the range of investment options provided in such plans” to mean the specific investment options the responsible plan fiduciary has selected as “designated investment alternatives” under the plan.^[4] The Department does not, for example, consider this language to require examination of the potentially large range of investments available through a brokerage window or similar arrangement, to the extent offered in a PEP. What would be efficient and comprehensive methods for the Department to determine the range of designated investment alternatives for all PEPs?

Question 4: Section 344(1)(E) of SECURE 2.0 requires the study to focus on the “manner in which employers select and monitor such plans.” How and by whom are PEPs most commonly marketed to employers? Do marketing techniques differ based on the size of employers? How often do employers rely on the advice of others when selecting and monitoring a PEP? If so, who gives this advice to employers, generally, e.g., consultants, financial advisors, brokers, record keepers, others? In addition to this RFI, are there other efficient and comprehensive methods for the Department to solicit information on the steps employers take to select and monitor PEPs and to decide to stay in the PEPs? For instance, should the Department consider a public hearing, focus groups, questionnaires, online polling, or other similar information gathering techniques? From whom should the Department solicit this information ( i.e., directly from employers, pooled plan providers, or both), using these other techniques?

Question 5: Section 344(1)(F) of SECURE 2.0 requires the study to focus on the disclosures provided to participants in such plans. What would be efficient and comprehensive methods for the Department to collect examples of such disclosures or otherwise solicit information from employers, PEPs, plan administrators, or other parties on the disclosures provided to plan participants? Is there additional or different information that should be disclosed to participants in the context of PEPs, versus what is required to be disclosed under ERISA to participants in other defined contribution plans? If so, why, and what other additional disclosures should be required in the context of PEPs?

Question 6: Section 344(1)(H) of SECURE 2.0 requires the study to focus on the extent to which PEPs have “increased retirement savings coverage in the United States.” How should the Department measure “increased retirement savings coverage” and what information would the Department need to make this assessment? For example, the formation of new PEPs may suggest increased coverage, but if the participating employers previously maintained a retirement plan, that could indicate a transfer of coverage types, rather than an increase in coverage. What are efficient and comprehensive methods for the Department, depending on how “increase retirement savings coverage” is measured, to collect such information?

B. Emergency Savings Accounts Linked to Individual Account Plans. Section 127 of SECURE 2.0 amended ERISA section 3 to add a new definition, at section 3(45), for a “pension-linked emergency savings account” (PLESA). A PLESA is a short-term savings account established and maintained as part of an individual account plan. Section 127 of SECURE 2.0 also added a new part 8 to subtitle B of title I of ERISA that includes a comprehensive set of requirements for PLESAs. This includes a requirement that plan administrators for individual account plans that include PLESAs furnish to participants an initial and annual notice as to: the purpose of PLESAs; limits on and tax treatment of, contributions to a PLESA; any fees, expenses, restrictions, or charges associated with PLESAs; procedures for electing to make or opting out of PLESA contributions, changing contribution rates, and making participant withdrawals; the amount of the PLESA account and the amount or percentage of compensation a participant has contributed to the PLESA; the designated investment option for PLESA contributions; options for the PLESA account balance after termination of employment or of the PLESA by the plan sponsor; and other information. Section 127 of SECURE 2.0 also amended section 110 of ERISA to grant the Department authority to prescribe an alternative method for satisfying any reporting and disclosure requirement under ERISA with respect to PLESAs. Section 127 of SECURE 2.0 also amended section 404(c) of ERISA with respect to specified default investment arrangements for PLESAs. The amendments made to ERISA are applicable to plan years beginning after December 31, 2023.

Question 7: What guidance, if any, do plan administrators need to effectively implement the requirements of section 127 of SECURE 2.0 and new part 8 of ERISA? Because section 127 of SECURE 2.0 impacts many provisions under ERISA and the Code, commenters are encouraged to be as specific as possible with their responses, with clear citation to the specific statutory provision or provisions in question. If guidance is needed on multiple provisions, commenters are asked to prioritize the issues according to importance and offer a supporting rationale for the priority.

Question 8: Would administrators of plans that include PLESAs benefit from a model notice or model language for inclusion in the required notice under section 801 of ERISA? If so, commenters are encouraged to submit suggested model language.

C. Performance Benchmarks for Asset Allocation Funds. Section 318 of SECURE 2.0 requires that the Department, not later than two years after enactment, issue regulations under ERISA section 404 (Fiduciary duties) providing that:

[I]n the case of a designated investment alternative that contains a mix of asset classes, the administrator of a plan may, but is not required to, use a benchmark that is a blend of different broad-based securities market indices if—(1) the blend is reasonably representative of the asset class holdings of the designated investment alternative; (2) for purposes of determining the blend's returns for 1-, 5-, and 10-calendar-year periods (or for the life of the alternative, if shorter), the blend is modified at least once per year if needed to reflect changes in the asset class holdings of the designated investment alternative; (3) the blend is furnished to participants and beneficiaries in a manner that is reasonably calculated to be understood by the average plan participant; and (4) each securities market index that is used for an associated asset class would separately satisfy the requirements of such regulation for such asset class.

Question 9: Are there additional factors beyond the criteria in section 318 of SECURE 2.0 that plan administrators should use to ensure they can effectively select and monitor, and participants and beneficiaries can effectively understand and utilize, blended performance benchmarks for mixed asset class funds? If so, why, and what are the other factors the Department should consider when developing regulations? Commenters are encouraged to review the Department's prior guidance on the use of blended performance benchmarks, albeit as secondary benchmarks, for purposes of the participant-level disclosure regulation; the standards for use of a “reasonable” blended performance benchmark therein are similar, but not identical, to the four criteria in section 318 of SECURE 2.0.^[5]

Question 10: Section 318 of SECURE 2.0 also requires that the Department, not later than three years after the applicability date of such regulations, deliver a report to Congress regarding the utilization, and participants' understanding of these benchmark requirements. Comments are solicited on methods the Department might use to assess whether, and the extent to which, participants understand the type of benchmark described in section 318 of SECURE 2.0.

D. Defined Contribution Plan Fee Disclosure Improvements. Section 340 of SECURE 2.0 requires the Department to undertake a review of 29 CFR 2550.404a–5, relating to fiduciary requirements for disclosure in participant-directed individual account plans. The review must explore how the contents and design of the disclosures under this regulation may be improved to enhance participants' understanding of defined contribution plan fees and expenses, including the cumulative effect of such fees on retirement savings over time. The Department must submit a report of its findings to Congress within three years, including recommendations for legislative changes. Although the Department may take steps in addition to this RFI to conduct its review of the regulation in question, the Department anticipates that responses to the following questions will be a helpful start.

The regulation that is the subject of this required review was published in 2010. The intent of the regulation was to increase fee transparency and to provide America's workers with the information they need to effectively manage and invest the money they contribute to their 401(k)-type retirement plans. The regulation requires that plan administrators use standard methodologies when calculating and disclosing investment expense and historical return information to achieve uniformity across the spectrum of investment options that exist in 401(k)-type plans, facilitating “apples-to-apples” comparisons among investment options. The regulation also requires that investment-related information is furnished in a format that enables workers to meaningfully compare the cost and historical performance of investment options available in their plan.

Question 11: What information, including information required by the subject regulation, is currently being provided to participants in participant-directed individual account plans to provide them with information about their plans' fees and expenses and the cumulative effect of fees and expenses on their retirement savings over time? How is the information adequate or inadequate in helping plan participants make informed investment decisions? If inadequate, is there evidence that this inadequacy is tied directly to the subject regulation as opposed to other exogenous factors impacting financial literacy?

Question 12: Is there evidence that the subject regulation could or should be improved to help participants better understand the fees and expenses related to their participant-directed individual account plans? For instance, is there additional or different content, not required under the current regulation, that could enhance participants' understanding of the costs associated with participating in their plan, including the costs of their available investment options? In addition, are there additional or different design, formatting, delivery, or other similar characteristics, not required under the current regulation, that could improve the effectiveness of these disclosures? If so, how should these improvements be incorporated into the subject regulation?

Question 13: The subject regulation requires that investment fee and performance information for each designated investment alternative under the plan must be furnished in a chart or similar format that is designed to facilitate a comparison of such information.^[6] Is the Department's model comparative chart, attached to this RFI as Appendix A, helpful to participants in facilitating a meaningful comparative analysis and selecting among investment options and for plan administrators in satisfying their disclosure obligations under the regulation? If not, how could the model be modified to enhance its effectiveness? Are there examples of disclosures provided to satisfy the subject regulation that use formats or designs that differ from the Department's model comparative chart that have proven to be more effective?

E. Eliminating Unnecessary Plan Requirements Related to Unenrolled Participants. Section 320 of SECURE 2.0 amended ERISA by inserting a new section 111, applicable for plan years beginning after December 31, 2022. Section 111 provides that, with respect to individual account plans, no required disclosure, notice, or other plan document, must be furnished to unenrolled participants, subject to two exceptions. Under the first exception, the unenrolled participant must be furnished an annual reminder notice of the participant's eligibility to participate in the plan and any applicable election deadlines. Under the second exception, the unenrolled participant must be furnished any document to which they are otherwise entitled if the participant requests the document. Section 111 defines an “unenrolled participant” for this purpose as an employee who is eligible to participate in an individual account plan; has been furnished a summary plan description and any other ERISA or Code notices related to the participant's initial eligibility to participate in the plan; is not participating in such plan; and satisfies such other criteria as the Department, in consultation with the Treasury Department, may determine appropriate. Section 111 also defines an “annual reminder notice” for this purpose as a notice provided in accordance with 29 CFR 2520.104b–1 that is furnished in connection with the annual open season election period for the plan or, if there is no such period, is furnished within a reasonable period prior to the beginning of each plan year; and that notifies the unenrolled participant of their eligibility to participate in the plan, the key benefits and rights under the plan, with a focus on employer contributions and vesting provisions; and provides such information in a prominent manner calculated to be understood by the average participant. Section 320 of SECURE 2.0 also makes amendments to the Code that are parallel to the amendments to ERISA.

Question 14: Is there any guidance, regulatory or otherwise, that plan administrators need or would find helpful to implement ERISA section 111?

Question 15: Are there additional criteria that the Department, in consultation with the Treasury Department, should consider for determining who is an unenrolled participant?

Question 16: Is there additional information that the Department, in consultation with the Treasury Department, should consider for inclusion on the required “annual reminder notice” to unenrolled participants?

Question 17: Would plan administrators benefit from a model notice or model language for inclusion in the required “annual reminder notice” to unenrolled participants? If so, commenters are encouraged to submit suggested model language, specifically focusing on the “key benefits and rights under the plan, with a focus on employer contributions and vesting provisions” language. Considering that different plans contain different “benefits and rights,” and a range of plan-specific employer contribution rates and vesting provisions, is it feasible for the Department to create model language?

Question 18: Is there a reliable source of data to estimate the number of people that may be impacted by section 111 of ERISA?

F. Requirement to Provide Paper Statements in Certain Cases. Section 338 of SECURE 2.0 amended ERISA section 105(a)(2) by adding a new requirement, “Provision of Paper Statements,” effective for plan years beginning after December 31, 2025, that at least one pension benefit statement furnished for a calendar year for an individual account plan, and at least one pension benefit statement furnished every three years for a defined benefit plan, must be furnished on paper in written form, with two general exceptions. First, if a plan furnishes such statement in accordance with 29 CFR 2520.104b–1(c) (the Department's 2002 electronic delivery safe harbor, or the 2002 safe harbor), no paper statement must be furnished. Second, if a plan permits participants and beneficiaries to request that pension benefit statements be furnished by electronic delivery, no paper statement must be furnished to individuals who request electronic delivery if the statements are so delivered.^[7]

Section 338 of SECURE 2.0 directs the Department to update the 2002 safe harbor to provide that, in addition to the other requirements of the safe harbor, participants who first become eligible to participate (and beneficiaries who first become eligible for benefits) after December 31, 2025 must be furnished a one-time initial notice on paper in written form, prior to the electronic delivery of any pension benefit statement, their right to request that all documents be furnished on paper in written form. Section 338 of SECURE 2.0 also directs the Department, no later than December 31, 2024, to update “applicable guidance governing electronic disclosure,” except for the 2002 safe harbor, as necessary to ensure that (1) participants and beneficiaries are permitted the opportunity to request that any disclosure required to be delivered on paper under such guidance shall be furnished electronically; (2) each paper statement furnished pursuant to such updated guidance includes an explanation of how to request that all such statements, and any other documents required to be disclosed under ERISA, be furnished electronically and contact information for the plan sponsor, including a telephone number; (3) the plan may not charge any fee to a participant or beneficiary for delivery of any paper statements; (4) each required document that is furnished electronically by such plan shall include an explanation of how to request that all such documents be furnished on paper in written form; and (5) a plan is permitted to furnish a duplicate electronic statement in any case when the plan furnishes a paper pension benefit statement. The “applicable guidance governing electronic disclosure” referenced in section 338(b) of SECURE 2.0 refers to the Department's second electronic delivery safe harbor regulation at 29 CFR 2520.104b–31, titled “Alternative method for disclosure through electronic media—Notice-and-access” (the 2020 electronic delivery safe harbor, or the 2020 safe harbor).^[8] The Department intends, therefore, to update the 2020 safe harbor as necessary to reflect these updates.

Question 19: What modifications or updates to the 2002 safe harbor are needed to implement section 338 of SECURE 2.0? Commenters are encouraged to consider whether any additional information (other than a statement of the right to request that all documents required to be disclosed under ERISA be furnished on paper in written form) should be included, and whether there are other standards that should apply to the required one-time initial paper notice that must be furnished for compliance with 29 CFR 2520.104b–1(c), the 2002 safe harbor? For example, should the 2002 safe harbor be modified or updated to include an initial paper notice that resembles the initial paper notice required by paragraph (g) of the 2020 safe harbor regulation?

Question 20: What modifications or updates to the 2020 safe harbor are needed to implement section 338 of SECURE 2.0? Commenters are encouraged to consider and compare the contents of the initial paper notification required under paragraph (g) of the 2020 safe harbor with the content requirements of section 338(b)(2)(B) of SECURE 2.0. To what extent should a statement under ERISA section 105(a)(2) contain the content of the initial paper notification described in paragraph (g) of the 2020 safe harbor, and why?

Question 21: Should both safe harbors be modified such that their continued use by plans is conditioned on access in fact? Can plan administrators (through their electronic delivery systems) reliably and accurately ascertain whether an individual actually accessed or downloaded an electronically furnished disclosure, or determine the length of time the individual accessed the document? If so, should the safe harbors contain a condition that plan administrators monitor whether individuals actually visited the specified website or logged on to the website, as a condition of treating website access as effective disclosure? And, in the event that such monitoring reveals individuals have not visited or logged on to the specified website (meaning that effective disclosure was not achieved through website access), should the safe harbors require that plan administrators revert to paper disclosures or take some other action in the case of individuals whom plan administrators know forsake such access?

G. Consolidation of Defined Contribution Plan Notices. Section 341 of SECURE 2.0 requires the Department and the Treasury Department, not later than two years after enactment, to issue regulations providing that plan administrators may, but are not required to, consolidate two or more of the following notices into a single notice: (1) the qualified default investment alternative notice, ERISA section 404(c)(5)(B); (2) the notice for preemption of automatic contribution arrangements, ERISA section 514(e)(3); (3) the notice for alternative methods of meeting nondiscrimination requirements, Code section 401(k)(12)(D); (4) the notice for alternative methods of meeting nondiscrimination requirements for automatic contribution arrangements, Code section 401(k)(13)(E); and (5) the notice for special rules for certain withdrawals from eligible automatic contribution arrangements, Code section 414(w)(4). The consolidated notice must include all required content, clearly identify the matters addressed therein, satisfy the timing and frequency requirements for each such notice, and be presented in a manner that is reasonably calculated to be understood by the average plan participant without obscuring, or failing to highlight, the primary information for each notice.

Question 22: To what extent are regulations needed for plan administrators to consolidate the notices described in section 341 of SECURE 2.0? What are the perceived legal impediments to consolidation under current law and regulations? What are the perceived administrative or other practical impediments to consolidation? What are the benefits and drawbacks to plans of consolidating the notices described in section 341 of SECURE 2.0? Similarly, what are the benefits and drawbacks to plan participants and beneficiaries of consolidating these notices? Other than plans and plan participants, are there other stakeholders that have an interest in this topic? If so, who and what are their interests?

H. Information Needed for Financial Options Risk Mitigation. Section 342 of SECURE 2.0 amended part 1 of ERISA by adding a new section 113 that requires administrators of plans amended to provide a period of time during which a participant or beneficiary may elect to receive a lump sum to, among other things, provide participants and beneficiaries with advance notice of the opportunity to elect a lump sum payment in lieu of annuity payments for life from the pension plan. The disclosure under section 113 would provide participants and beneficiaries, as they consider what is best for their financial futures, with important information to compare the other distribution options available under the plan, such as monthly payments for life and the life of their spouses, and the lump sum. In addition to explaining the potential ramifications of accepting the lump sum, the disclosure also would explain how the lump sum was calculated, including whether the lump sum is based on the early retirement benefit and, for a terminated vested participant, the relative values of the lump sum, the single life annuity, and the qualified joint and survivor annuity. The disclosure would also have to provide details about the election period, and how to obtain additional information. Section 342 of SECURE 2.0 requires the Department to issue regulations implementing the requirements under section 113 of ERISA not earlier than one year after enactment. Further, these regulations must contain a model disclosure reflecting the content requirements under section 113 that plan administrators may use to discharge their statutory obligation.

Question 23: Is there a need for guidance with respect to any of the specific content requirements in ERISA section 113(b)(1)(A) through (H)? If so, please specify the particular content requirement and explain the need for guidance.

Question 24: ERISA section 113(b)(1)(E) requires the notice to specify, in a manner calculated to be understood by the average plan participant, the “potential ramifications of accepting the lump sum.” Beyond the specific items set forth in ERISA section 113(b)(1)(E), what other potential ramifications should the Department consider incorporating into regulations under ERISA section 113, and why?

Question 25: Are transactional complexity, aging and cognitive decline, and financial literacy relevant factors the Department should consider when deciding to add to the list of potential ramifications in making regulations under section 113 of ERISA? Risk transfer transactions are by nature inherently complex involving uncertainty. Some behavioral finance professionals suggest that more and better information by itself is unlikely to ensure that people, even with average financial literacy, make good choices in the cognitively challenging task of choosing between an annuity and a lump-sum payout. Despite such challenges, are there ways to structure and present the notice that would increase the likelihood of better decisions and retirement outcomes?

Question 26: Are there mandatory notices or disclosures under the Code that the Department should factor into the development of regulations under section 113 of ERISA? If so, which notices and disclosures, and how should they be factored into regulations under section 113 of ERISA?

Question 27: The Department must issue a model notice for plan administrators to use in discharging their new statutory disclosure obligations under section 113 of ERISA. Commenters are encouraged to submit for the Department's consideration exemplary samples of notices that plan administrators have used in prior lump sum offers that comprehensively explain the consequences of electing a lump sum in lieu of annuity payments for life. Commenters should include a concise explanation of why the commenter believes that the sample was effective in conveying meaningful information to participants and beneficiaries. The Department, in turn, offers for consideration by commenters a model notice developed in 2015 by the ERISA Advisory Council.^[9] The Council's model is the product of careful deliberation following the receipt of extensive public input from a broad array of stakeholders.^[10] The model is attached as Appendix B to this RFI.^[11] Should the Department consider using this model as the starting point for the model required under section 113 of ERISA, and if not, why? If so, to what extent could and should this model be improved, for example, to conform to specific requirements under section 113 that were not considered by the ERISA Advisory Council?

Question 28: ERISA section 113 contains a pre- and post-election window reporting framework under which plans must report information relating to the lump sum offerings and elections to the Department and the PBGC. In addition to the number of participants and beneficiaries who accepted the lump sum offer, the Department has authority to require plans to furnish “such other information as the Department may require” in the post-election report. Separately, the Department itself must report information about offerings and elections to Congress on a biennial basis. The Department also must post on its website for public consumption the information it receives under this reporting framework. The Department is considering what information should be reported to the Department to ensure that the Department can effectively discharge its monitoring, enforcement, public disclosure, and biennial reporting obligations under ERISA. To these ends, what data or information other than the number of participants and beneficiaries who were eligible for and accepted lump sum offers should be reported to the Department, and why? For instance, should the Department collect demographic information on those individuals who elected lump sum offers and, if so, what information? This information could, for instance, enable the Department to provide Congress with more detailed information on the cohorts of participants and beneficiaries who accept lump sum offers as compared to those who do not.

I. Defined Benefit Annual Funding Notices. Section 343 of SECURE 2.0 amended section 101(f) of ERISA by modifying the content requirements for defined benefit plan annual funding notices. For single-employer defined benefit plans, the “funding target attainment percentage” was replaced by the “percentage of plan liabilities funded” as a measure to reflect the plan's current funding status in section 101(f) notices. The replacement measure uses year-end market value for assets rather than actuarial value, disregards prefunding and funding carryover balances, and determines year-end liabilities using unadjusted spot segment rates. Funding notices for single-employer plans also must contain a statement of the circumstances when participants and beneficiaries may receive benefits in excess of the amount guaranteed by PBGC. The existing requirement regarding participant demographic data also was expanded to include the preceding two years and mandates presentation of the data in tabular format. The new amendments apply for plan years beginning after December 31, 2023.

Question 29: Is there a need for guidance with respect to any of the amended content requirements in section 101(f)(2)(B) of ERISA? If so, please specify the provision and explain the need for such guidance.

Question 30: Is there a need for guidance on the interrelationship of the new definition of “percentage of plan liabilities funded” in section 101(f)(2)(B) and the segment rate stabilization disclosure provisions in section 101(f)(2)(D)? When applicable, the segment rate stabilization disclosure provisions continue to use the funding target attainment percentage. In responding to this question, commenters are encouraged to address the extent to which participants and beneficiaries would find value in, or alternatively be confused by, two different funding percentages for the same plan.

Question 31: Existing regulations under section 101(f) of ERISA contain a model notice for single-employer defined benefit plans.^[12] The Department is interested in suggestions and comments on how to modify the model to reflect the amendments to section 101(f) of ERISA by SECURE 2.0, and for improvements more generally. For ease of reference, the model is attached to this RFI as Appendix C.^[13]

Signed at Washington, DC, this 8th day of August, 2023.

Lisa M. Gomez,

Assistant Secretary, Employee Benefits Security Administration, Department of Labor.

Footnotes

1.  88 FR 11793 (Feb. 24, 2023).

2.  88 FR 9408 (Feb. 14, 2023).

3.  The required study will focus on: the legal name and number of pooled employer plans; the number of participants in such plans; the range of investment options provided in such plans; the fees assessed in such plans; the manner in which employers select and monitor such plans; the disclosures provided to participants in such plans; the number and nature of any enforcement actions by the Department on such plans; the extent to which such plans have increased retirement savings coverage in the United States; and any additional information as the Department determines is necessary. SECURE 2.0 section 344.

4.  29 CFR 2550.404a–5(h)(4).

5.   See, e.g., Field Assistance Bulletin 2012–02R (July 30, 2012), Question 16; 75 FR 64910, 917 (Oct. 20, 2010).

6.   See29 CFR 2550.404a–5(d)(2).

7.  Section 338 of SECURE 2.0 did not amend the alternative notice provision in section 105(a)(3) of ERISA. ERISA section 105(a)(3)(A), in relevant part, provides that plan administrators of defined benefit plans shall be treated as meeting the requirements of ERISA section 105(a)(1)(B)(i) “if at least once each year the administrator provides to the participant notice of the availability of the pension benefit statement and the ways in which the participant may obtain such statement.”

8.  29 CFR 2520.104b–31; 85 FR 31884 (May 27, 2020).

9.  ERISA section 512 provides for the establishment of an advisory council on employee pension and welfare plans, known as the ERISA Advisory Council. The Council is comprised of fifteen members representing different stakeholders, meets at least four times annually, and advises the Department and submits recommendations on the Department's functions under ERISA.

10.  A list of witnesses providing input to the Council on this topic, including their written statements, is available at www.dol.gov/​agencies/​ebsa/​about-ebsa/​about-us/​erisa-advisory-council/​2015-written-statements-by-invited-witnesses-and-issue-statements#2.

11.  The full Report explaining the model is available at www.dol.gov/​sites/​dolgov/​files/​EBSA/​about-ebsa/​about-us/​erisa-advisory-council/​2015-model-notices-and-disclosures-for-pension-risk-transfers.pdf.

12.  29 CFR 2520.101–5.

13.  Although SECURE 2.0 made only modest changes under section 101(f) with respect to multiemployer defined benefit plans, commenters are not precluded from submitting suggestions or ideas on how to improve the existing model notice for such plans.