If they haven’t done so already, multiemployer pension plan administrators should start gathering actuarial and financial reports prepared for their plans in prior years so they can respond quickly to requests for such information pursuant to a new provision that became effective on January 1, 2008 for calendar year plans.
The new provision, Section 101(k)(1) of ERISA, was added by Section 502(a)(1) of the Pension Protection Act of 2006 (the “PPA”).¹ The provision requires the administrator of a multiemployer plan, upon written request, to furnish certain documents to any plan participant, beneficiary, employee representative, or any employer that has an obligation to contribute to the plan. Failure to provide the requested documents within 30 days subjects the plan administrator to civil penalties imposed by the Department of Labor of up to $1,000 per day, as well as potential penalties recoverable by participants of up to $110 per day.
The documents that must be furnished under this provision are:
- a copy of any periodic actuarial report for any plan year (including sensitivity testing) which has been received by the plan, and which has been in the plan’s possession for at least 30 days;
- a copy of any quarterly, semi-annual, or annual financial report prepared for the plan by any plan investment manager or advisor or other fiduciary which has been in the plan’s possession for at least 30 days; and
- a copy of any application filed with the Secretary of the Treasury requesting an amortization extension under ERISA section 304 or IRC section 431(d), and the determination of such application.
The Department of Labor promulgated proposed regulations implementing the new provision last September. The proposed regulations do not further elaborate on the meaning of “actuarial report” or “financial report,” other than to clarify that financial reports by advisors are subject to disclosure regardless of whether the advisor is a fiduciary under ERISA section 3(21). In addition, neither the statute nor the proposed regulations place any limit on how far back a plan administrator must go in providing “any” actuarial or financial report that otherwise meets the criteria for production. In preparing its impact analysis of its proposed regulations, the Department of Labor stated that it “assumed” that plans would not receive requests for documents for years prior to 2002. Thus, plans should be prepared to respond to requests for documents dating back at least that far, if such documents are still in the plan’s possession.
Plan administrators should make sure that the documents that they produce do not contain certain information. Thus, plan administrators should excise (or not produce documents that contain only) the following information:
- any information or data which served as the basis for any report or application subject to production (although such information may be subject to disclosure pursuant to a different provision of ERISA); and
- any information that the plan administrator reasonably determines to be either:
- individually identifiable information regarding any plan participant, beneficiary, employee, fiduciary or contributing employer; or
- proprietary information regarding the plan or any contributing employer or service provider.
The plan administrator must inform the requester if it withholds any such information in response to a request.
The plan administrator may charge the requester the reasonable costs of furnishing the documents. The proposed regulations describe a reasonable charge as the lesser of the actual cost to the plan of the least expensive means of reproduction, or .25 per page, plus the cost of mailing or otherwise delivering the documents. Electronic media may also be used to furnish the documents.
While the statute itself is not entirely clear, the proposed regulations appear to indicate that the new disclosure provisions apply only to multiemployer plans that are tax qualified under section 401(a) of the Internal Revenue Code — both defined benefit and defined contribution — and not to other types of multiemployer plans (e.g., welfare or apprenticeship), and final regulations may clarify this issue further. In the meantime, multiemployer welfare and similar plans should check with legal counsel to determine whether they need to respond to any requests made under ERISA section 101(k).
In addition to establishing the new disclosure requirements, the PPA amended ERISA section 502(c)(4), authorizing the Secretary of Labor to assess penalties of up to $1,000 per day for each violation of Section 101(k), payable by the plan administrator (i.e., not out of plan assets). The Department recently promulgated proposed regulations setting forth certain procedures it intends to follow prior to assessing a penalty, including written notice and an opportunity for the administrator to respond. The proposed regulations state that, in determining the amount of penalties to be assessed (and whether such penalties should be waived), the Department shall take into consideration the degree or willfulness of the failure or refusal to furnish the requested documents. Under the proposed regulations, each item that is improperly withheld following a request under Section 101(k) is considered a separate violation — potentially exposing the plan administrator to thousands of dollars per day in penalties if it fails to respond to a request in a timely manner. Whether the Department will actually enforce the provision in this manner remains to be seen.
In addition to penalties that may be assessed by the Department of Labor, a plan administrator is potentially subject to the $110 per day penalties that may be recovered by a plan participant pursuant to ERISA sections 502(a)(1)(A) and 502(c). Those sections permit a plan participant to bring a civil action — including the recovery of penalties of up to $110 per day — against a plan administrator if the administrator fails or refuses to provide in a timely manner any documents required to be provided under ERISA.
Rather than waiting for the first requests for information to arrive, and risk being unable to provide the documents within 30 days, plan administrators should begin compiling an inventory of the documents that it will provide in response to Section 101(k) requests. Plan administrators should confer with plan counsel and the plan’s investment and actuarial service providers to determine what documents exist that meet the criteria for production, and whether they contain information that must be redacted. In addition, plan administrators may want to discuss with counsel and service providers appropriate changes to the content of future reports so that documents that must be provided under Section 101(k) do not contain extraneous information — i.e., information that, but for the fact that it is contained in a periodic actuarial or quarterly, semiannual or annual financial report, would not otherwise be subject to production under Section 101(k).
¹ The PPA also created other disclosure requirements for multiemployer plans. Those requirements were discussed in our November 2006 edition.