Plan sponsor disclosures getting closer look under SECURE 2.0

Congress has tasked federal regulators with studying the disclosure and reporting requirements for plan sponsors and recommending ways to simply, consolidate or standardize the disclosure landscape.

The directive is part of a bipartisan retirement security package known as SECURE 2.0 that lawmakers passed in December as part of a year-end spending bill. SECURE 2.0 features more than 90 provisions, including several on simplifying and clarifying retirement plan rules.

Under one such provision, leaders at the Department of Labor, Treasury Department and Pension Benefit Guaranty Corp. were directed to issue a report to Congress within three years on possible avenues to streamline the plan sponsor disclosure landscape.

Andy Banducci, senior vice president of retirement and compensation policy at the ERISA Industry Committee, a Washington-based non-profit association that represents employers on benefit issues, said in an email that ERIC strongly supports the provision.

"We look forward to working with the agencies as they recommend changes that will help plan sponsors more efficiently provide workers and retirees with the information they need to make retirement plan decisions," he said.

ERIC has long recommended that regulators study disclosure requirements, like summary plan descriptions, summary annual reports, summary of material modifications, single employer annual funding notices, fee disclosures, qualified default investment arrangement/safe harbor notices, rollover notices, participant account statements, securities-related disclosures, and distribution options, including lifetime annuity estimate disclosures, choices around risk transfer transactions, according to a report it issued in 2019.

"It takes a lot of time and effort to create all of these disclosures," said Allison Itami, principal, co-chair plan sponsor practice at Groom Law Group, so it's no surprise lawmakers want regulators to examine the matter.

Moreover, part of what regulators will likely study, Ms. Itami said, is how effective the disclosures to participants are.

"These financial disclosures are not very easy for participants to necessarily digest," she said. "There's always been a huge tension between getting down what is required by the law, which is what we as lawyers want our plans to do, and making it digestible to participants."