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Reporting and DisclosureReporting and Disclosure

Daniel N. JanichDaniel N. JanichJanich Law GroupJanich Law Group

222 North LaSalle Street222 North LaSalle StreetSuite 2500Suite 2500

Chicago, IL 60601Chicago, IL 60601Tel. 312.609.4528Tel. 312.609.4528Fax 312.609.5005Fax 312.609.5005

djanich@janichlawgroup.comdjanich@janichlawgroup.com

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BackgroundBackground

Limited reporting and disclosure requirements Limited reporting and disclosure requirements under Welfare & Pension Disclosure Actunder Welfare & Pension Disclosure Act

ERISA enacted in response to concern that ERISA enacted in response to concern that participants were acting on inaccurate or participants were acting on inaccurate or incomplete plan informationincomplete plan information

ERISA Part 1, Title I establishes reporting and ERISA Part 1, Title I establishes reporting and disclosure obligations for covered pension and disclosure obligations for covered pension and welfare plans welfare plans

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BackgroundBackground

ERISA requires reporting and disclosure to:ERISA requires reporting and disclosure to: One or more federal agencies (IRS, DOL, PBGC)One or more federal agencies (IRS, DOL, PBGC) Plan participants and beneficiariesPlan participants and beneficiaries

Disclosure obligations cover automatic and Disclosure obligations cover automatic and responsive disclosuresresponsive disclosures

Plan administrator responsible for compliancePlan administrator responsible for compliance Individual or group of individualsIndividual or group of individuals By default, sponsoring employerBy default, sponsoring employer

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ERISA’s Role in Reporting & DisclosureERISA’s Role in Reporting & Disclosure

Why require reporting and disclosure?Why require reporting and disclosure? To inform participants and beneficiariesTo inform participants and beneficiaries

know their plan rightsknow their plan rights provided information to make informed decisionsprovided information to make informed decisions

Assist compliance effortsAssist compliance efforts Encourage employer compliance by public filingsEncourage employer compliance by public filings Assist government monitoring of plansAssist government monitoring of plans

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Plans Exempt from the Reporting & Plans Exempt from the Reporting & Disclosure RequirementsDisclosure Requirements

The following plans are excluded from ERISA’s reporting The following plans are excluded from ERISA’s reporting and disclosure requirements:and disclosure requirements: governmental plansgovernmental plans certain church planscertain church plans plans maintained solely for the purpose of complying plans maintained solely for the purpose of complying

with applicable worker's compensation, unemployment with applicable worker's compensation, unemployment compensation or disability insurance laws compensation or disability insurance laws

plans maintained outside the United States for plans maintained outside the United States for nonresident aliensnonresident aliens

certain individual retirement accountscertain individual retirement accounts certain self-employed individuals' planscertain self-employed individuals' plans

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Review of ERISA Disclosure & Review of ERISA Disclosure & Reporting RequirementsReporting Requirements

Part One: Plan Participants & Part One: Plan Participants & BeneficiariesBeneficiaries

Part Two: Specific Disclosures Part Two: Specific Disclosures RequiredRequired

Part Three: Miscellaneous DisclosuresPart Three: Miscellaneous Disclosures

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Part One: Reporting & Disclosures to Part One: Reporting & Disclosures to Plan Participants & BeneficiariesPlan Participants & Beneficiaries

Annual Report (Form 5500)Annual Report (Form 5500) Summary Annual Report (SAR)Summary Annual Report (SAR) Summary Plan Description (SPD)Summary Plan Description (SPD) Summary of Material Modification (SMM)Summary of Material Modification (SMM) Participant Benefit StatementsParticipant Benefit Statements

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Annual ReportAnnual Report

Annual report must be filed for each Annual report must be filed for each ERISA covered planERISA covered plan Several popular benefit plans and programs, Several popular benefit plans and programs,

such as cafeteria plans, educational such as cafeteria plans, educational assistance programs, adoption assistance assistance programs, adoption assistance programs, and accidental death & programs, and accidental death & dismemberment plans, are exemptdismemberment plans, are exempt

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Annual ReportAnnual Report

Annual report is one primary form and several Annual report is one primary form and several attached schedulesattached schedules Five pension schedules cover plan operations over Five pension schedules cover plan operations over

previous yearprevious year Seven financial schedules cover plan expenses and Seven financial schedules cover plan expenses and

financial transactions involving plan assetsfinancial transactions involving plan assets Accountant’s report provides details on qualified plan Accountant’s report provides details on qualified plan

assets and related mattersassets and related matters DOL filing deadline: Last day of 7DOL filing deadline: Last day of 7 thth month after month after

end of plan yearend of plan year

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Annual ReportAnnual Report Plans exempt from filing annual report:Plans exempt from filing annual report:

Small insured or unfunded welfare plansSmall insured or unfunded welfare plans Certain group insurance arrangementsCertain group insurance arrangements Top-hat plansTop-hat plans

Accountant’s report not required for:Accountant’s report not required for: Unfunded or fully insured welfare plansUnfunded or fully insured welfare plans Pension plans holding solely insurance contractsPension plans holding solely insurance contracts Plans electing to defer accountant’s report for first two Plans electing to defer accountant’s report for first two

yearsyears Small pension plans under certain conditionsSmall pension plans under certain conditions

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Annual ReportAnnual Report

Civil penalties for inaccurate or incomplete Civil penalties for inaccurate or incomplete reports:reports: IRS $25/day penalty; maximum $15,000 per reportIRS $25/day penalty; maximum $15,000 per report DOL $1,100 /day penalty, plus separate penalties if DOL $1,100 /day penalty, plus separate penalties if

certain schedules are missingcertain schedules are missing Criminal sanctions for willful violations of Title ICriminal sanctions for willful violations of Title I

Fine up to $5,000 ($100,000 for companies) or up to Fine up to $5,000 ($100,000 for companies) or up to one year in prison, or bothone year in prison, or both

Additional criminal fines and imprisonment for fraud Additional criminal fines and imprisonment for fraud DOL equitable reliefDOL equitable relief

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Annual ReportAnnual Report It is always cheaper to self-confessIt is always cheaper to self-confess Delinquent Filer Voluntary Compliance Delinquent Filer Voluntary Compliance

(DFVC) Program requires:(DFVC) Program requires: All delinquent annual returns must be filedAll delinquent annual returns must be filed Civil penalty of $10/day, up to $750 per report Civil penalty of $10/day, up to $750 per report

for small plansfor small plans Civil penalty of $10/day, up to $2,000 per Civil penalty of $10/day, up to $2,000 per

report for large plansreport for large plans IRS and PBGC will waive their separate IRS and PBGC will waive their separate

penaltiespenalties

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Summary Annual Report (SAR)Summary Annual Report (SAR)

SAR discloses plan’s financial conditionSAR discloses plan’s financial condition Must be provided to participants and Must be provided to participants and

beneficiaries annuallybeneficiaries annually Within nine months after plan year close, orWithin nine months after plan year close, or Within two months after end of extension period to file Within two months after end of extension period to file

annual reportannual report SAR not required for small insured or unfunded SAR not required for small insured or unfunded

welfare plans or top hat planswelfare plans or top hat plans Only ERISA criminal penalties for willful failure to Only ERISA criminal penalties for willful failure to

provide SARprovide SAR

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Summary Plan Description (SPD)Summary Plan Description (SPD) SPD is summary of plan benefits, rights and featuresSPD is summary of plan benefits, rights and features Must be written in plain English, accurate and completeMust be written in plain English, accurate and complete Must be furnished within 90 days after participation or Must be furnished within 90 days after participation or

benefits beginbenefits begin Updated every 5 years if plan was amended or every 10 Updated every 5 years if plan was amended or every 10

years otherwiseyears otherwise Must be furnished to DOL upon request; civil penalty for Must be furnished to DOL upon request; civil penalty for

ignoring requestignoring request Noncompliance with SPD requirements may result in civil Noncompliance with SPD requirements may result in civil

penalties of up to $110 per daypenalties of up to $110 per day

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Summary Plan Description (SPD)Summary Plan Description (SPD)

SPD content requirements revised by DOL:SPD content requirements revised by DOL: Model ERISA Rights StatementModel ERISA Rights Statement Claims Procedure Disclosures – health plans required Claims Procedure Disclosures – health plans required

to provide detailed disclosuresto provide detailed disclosures Support Order Procedures – pension/QDRO and Support Order Procedures – pension/QDRO and

health plan/QMCSO procedureshealth plan/QMCSO procedures Claim Management and Utilization Control – health Claim Management and Utilization Control – health

plan coverage issuesplan coverage issues PPO providers, HMO coverage, NMHPA and COBRA PPO providers, HMO coverage, NMHPA and COBRA

rights rights

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Summary Plan Description (SPD)Summary Plan Description (SPD)

Frequent litigation arising from Frequent litigation arising from noncompliance with SPD noncompliance with SPD requirements:requirements: Content requirements not satisfiedContent requirements not satisfied Insurance policy and employer letter did Insurance policy and employer letter did

not constitute SPDnot constitute SPD SPD in conflict with plan SPD in conflict with plan

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Summary of Material Modification (SMM)Summary of Material Modification (SMM)

SMM as SPD amendment - required when material SMM as SPD amendment - required when material modification to plan or change made to SPDmodification to plan or change made to SPD

Like SPDs, clarity and brevity requiredLike SPDs, clarity and brevity required Furnished to current participants and beneficiaries within Furnished to current participants and beneficiaries within

210 days following end of plan year of change, but—210 days following end of plan year of change, but— HIPAA requires group health plans to notify participants HIPAA requires group health plans to notify participants

and beneficiaries within 60 days after adoption of any and beneficiaries within 60 days after adoption of any material reduction in covered services and benefitsmaterial reduction in covered services and benefits

SMMs furnished to DOL upon request; same penalty for SMMs furnished to DOL upon request; same penalty for noncompliance as SPDsnoncompliance as SPDs

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Participant Benefit StatementsParticipant Benefit Statements

Participant benefit statement addresses amount and Participant benefit statement addresses amount and form of deferred vested benefit for participantform of deferred vested benefit for participant

Must be provided to participants no later than annual Must be provided to participants no later than annual reportreport

Separated participants of qualified plans are entitled to Separated participants of qualified plans are entitled to updated individual benefit statementupdated individual benefit statement

Pension plan participants and beneficiaries may request Pension plan participants and beneficiaries may request additional statement of total accrued benefitsadditional statement of total accrued benefits

Proposed Enron related legislation would require Proposed Enron related legislation would require quarterly benefit statements for defined contribution quarterly benefit statements for defined contribution plans and tri-annual benefit statements for defined plans and tri-annual benefit statements for defined benefit plansbenefit plans

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Part Two: Specific Disclosures RequiredPart Two: Specific Disclosures Required

COBRACOBRA HIPAAHIPAA Survivor Annuity NoticesSurvivor Annuity Notices Eligible Rollover DistributionsEligible Rollover Distributions Sarbanes-Oxley Blackout NoticesSarbanes-Oxley Blackout Notices Notice of Reduction in Benefit Accrual RateNotice of Reduction in Benefit Accrual Rate ERISA Title IV Filing & Notice RequirementsERISA Title IV Filing & Notice Requirements

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COBRACOBRA Proposed regulations establish minimum standards for timing and Proposed regulations establish minimum standards for timing and

content of required notices and for administering notice processcontent of required notices and for administering notice process Various notices associated with COBRA rights:Various notices associated with COBRA rights:

Initial notice to employee and spouse when plan coverage beginsInitial notice to employee and spouse when plan coverage begins Events requiring employer to notify plan administratorEvents requiring employer to notify plan administrator Events requiring employee or qualified beneficiary to notify plan Events requiring employee or qualified beneficiary to notify plan

administratoradministrator Events requiring plan administrator to notify qualified beneficiaryEvents requiring plan administrator to notify qualified beneficiary Election noticesElection notices Notice of unavailability of continuation coverage [New]Notice of unavailability of continuation coverage [New] Notice of early termination of COBRA coverage [New]Notice of early termination of COBRA coverage [New]

Employer acting as plan administrator has 44 days after qualifying Employer acting as plan administrator has 44 days after qualifying event to notify qualified employee or beneficiary on COBRA rightsevent to notify qualified employee or beneficiary on COBRA rights

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Sanctions for COBRA NoncomplianceSanctions for COBRA Noncompliance

Excise tax of $100 per day for noncompliance Excise tax of $100 per day for noncompliance with COBRAwith COBRA

How long? Excise tax does not extend beyond How long? Excise tax does not extend beyond six months after maximum period of COBRA six months after maximum period of COBRA coverage for employee or qualifying beneficiarycoverage for employee or qualifying beneficiary

Unintentional failures subject to lesser excise tax Unintentional failures subject to lesser excise tax amount and waivable by Treasury Secretaryamount and waivable by Treasury Secretary

Failure to furnish COBRA notice subjects plan Failure to furnish COBRA notice subjects plan administrator to additional $110 per day penaltyadministrator to additional $110 per day penalty

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Health Insurance Portability and Health Insurance Portability and Accountability Act of 1996 (HIPAA)Accountability Act of 1996 (HIPAA)

Preexisting Condition Exclusions:Preexisting Condition Exclusions: Notice to participant disclosing imposition Notice to participant disclosing imposition

of preexisting condition exclusionof preexisting condition exclusion Group health plans required to provide Group health plans required to provide

notice of special enrollment rulesnotice of special enrollment rules Group health plans must provide Group health plans must provide

certificate of creditable coverage to former certificate of creditable coverage to former participants and beneficiariesparticipants and beneficiaries

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Health Insurance Portability and Health Insurance Portability and Accountability Act of 1996 (HIPAA)Accountability Act of 1996 (HIPAA)

Privacy Rules:Privacy Rules: Covered entity with direct treatment relationships Covered entity with direct treatment relationships

must provide privacy notice must provide privacy notice Privacy notice must explain in plain language:Privacy notice must explain in plain language:

uses and disclosures of protected health information uses and disclosures of protected health information for treatment, payment and health care operationsfor treatment, payment and health care operations

other permitted or required uses or disclosures under other permitted or required uses or disclosures under law without specific authorizationlaw without specific authorization

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Defined Benefit & Money Purchase Pension Defined Benefit & Money Purchase Pension Plans: Survivor Annuity NoticesPlans: Survivor Annuity Notices

Qualified Joint & Survivor Annuity (QJSA) notice must be Qualified Joint & Survivor Annuity (QJSA) notice must be provided to each participant soon before or soon after provided to each participant soon before or soon after annuity starting dateannuity starting date

Qualified Pre-Retirement Survivor Annuity (QPSA) notice Qualified Pre-Retirement Survivor Annuity (QPSA) notice must be provided after individual becomes plan must be provided after individual becomes plan participantparticipant

Notices must describe relative value of optional forms of Notices must describe relative value of optional forms of benefit compared to QJSA and QPSAbenefit compared to QJSA and QPSA

Failure to provide QJSA or QPSA notice may result in Failure to provide QJSA or QPSA notice may result in plan disqualification; subject plan to civil penalties for plan disqualification; subject plan to civil penalties for ERISA disclosure noncomplianceERISA disclosure noncompliance

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Eligible Rollover DistributionsEligible Rollover Distributions

Eligible rollover distribution notice to participants Eligible rollover distribution notice to participants explains potential tax consequences of explains potential tax consequences of distributiondistribution Generally provided within 90 days prior to distribution; Generally provided within 90 days prior to distribution;

model notices available from IRSmodel notices available from IRS Failure to furnish explanation: $100 per failure excise Failure to furnish explanation: $100 per failure excise

tax, up to $50,000 per calendar year tax, up to $50,000 per calendar year Distribution that is not eligible rollover Distribution that is not eligible rollover

distribution requires withholding tax noticedistribution requires withholding tax notice Failure to provide: excise tax of $10 per failure, up to Failure to provide: excise tax of $10 per failure, up to

$5,000 per calendar year$5,000 per calendar year

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Sarbanes-Oxley Act (SOA) : Blackout Sarbanes-Oxley Act (SOA) : Blackout NoticesNotices

Plan administrators generally required to provide 30 to Plan administrators generally required to provide 30 to 60 day notice to affected defined contribution plan 60 day notice to affected defined contribution plan participants and beneficiaries of suspension, limitation or participants and beneficiaries of suspension, limitation or restriction of right to direct or diversify assets or to obtain restriction of right to direct or diversify assets or to obtain loan or distribution for more than three consecutive loan or distribution for more than three consecutive business daysbusiness days

Plain language notice must explain reasons for blackout Plain language notice must explain reasons for blackout period, rights of participants and beneficiaries affected, period, rights of participants and beneficiaries affected, expected beginning and ending dates of blackout period, expected beginning and ending dates of blackout period, contact information for plan administrator; model contact information for plan administrator; model blackout notice availableblackout notice available

Failure to provide timely and adequate notice: civil Failure to provide timely and adequate notice: civil penalties of up to $100 per day per affected participant penalties of up to $100 per day per affected participant or beneficiary against plan administrator foror beneficiary against plan administrator for

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Defined Benefit & Money Purchase Plans: Defined Benefit & Money Purchase Plans: Notice of Reduction in Benefit Accrual RateNotice of Reduction in Benefit Accrual Rate

Significant reduction in rate of future benefit accruals Significant reduction in rate of future benefit accruals requires ERISA 204(h) notice to affected participantsrequires ERISA 204(h) notice to affected participants

Notice generally must be given prior to effective date of Notice generally must be given prior to effective date of plan amendment; timing requirement depends on size of plan amendment; timing requirement depends on size of plan and factual circumstance involvedplan and factual circumstance involved

Egregious failures to comply entitle affected participants Egregious failures to comply entitle affected participants to greater of plan benefits as calculated prior to or after to greater of plan benefits as calculated prior to or after plan amendmentplan amendment

Employer subject to $100 per day excise tax for Employer subject to $100 per day excise tax for noncompliance, up to $500,000 in any taxable year noncompliance, up to $500,000 in any taxable year

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ERISA Title IV Notice & Filing RequirementsERISA Title IV Notice & Filing Requirements

Notice of Reportable EventsNotice of Reportable Events Plan administrator must give PBGC timely notice of Plan administrator must give PBGC timely notice of

“reportable events,” i.e., events revealing plan or “reportable events,” i.e., events revealing plan or employer financial problems that impact PBGC employer financial problems that impact PBGC potential liability for benefits or increase likelihood of potential liability for benefits or increase likelihood of an underfunded plan terminationan underfunded plan termination

PBGC regulations list reportable events PBGC regulations list reportable events Penalty of up to $1,100 per day for noncompliance Penalty of up to $1,100 per day for noncompliance

with notice requirements, not to exceed $100 times with notice requirements, not to exceed $100 times the number of participantsthe number of participants

Reports on Large Underfunded PlansReports on Large Underfunded Plans Annual financial reporting to PBGC required for large Annual financial reporting to PBGC required for large

underfunded defined benefit plans; PBGC penalties of underfunded defined benefit plans; PBGC penalties of up to $1,100 per day against contributing sponsor for up to $1,100 per day against contributing sponsor for noncompliancenoncompliance

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ERISA Title IV Notice & Filing RequirementsERISA Title IV Notice & Filing Requirements Notice to Participants Regarding Underfunded PlansNotice to Participants Regarding Underfunded Plans

Plan administrator must report to plan participants and Plan administrator must report to plan participants and beneficiaries regarding plan’s funding status and limits on PBGC beneficiaries regarding plan’s funding status and limits on PBGC guaranty should plan terminate while underfunded; failure to guaranty should plan terminate while underfunded; failure to comply subjects plan administrator to civil penalty of up to $1,100 comply subjects plan administrator to civil penalty of up to $1,100 per day; PBGC model participant notice availableper day; PBGC model participant notice available

Notices Upon Termination of Defined Benefit Pension Notices Upon Termination of Defined Benefit Pension PlansPlans Notice to Participants: plan administrator issues notice of intent to Notice to Participants: plan administrator issues notice of intent to

terminate 60 to 90 days in advanceterminate 60 to 90 days in advance Notice to PBGC: plan administrator thereafter notifies PBGCNotice to PBGC: plan administrator thereafter notifies PBGC Notice of Benefits: on or before date PBGC is notified, plan Notice of Benefits: on or before date PBGC is notified, plan

administrator must also notify each participant, beneficiary and administrator must also notify each participant, beneficiary and alternate payee of his/her benefits under planalternate payee of his/her benefits under plan

Notice of Final Distribution: After PBGC approval of plan Notice of Final Distribution: After PBGC approval of plan termination, plan administrator files notice with PBGC confirming termination, plan administrator files notice with PBGC confirming completion of final distribution of plan assetscompletion of final distribution of plan assets

Missing Participants: plan administrator files with PBGC a Missing Participants: plan administrator files with PBGC a Schedule MP if plan has missing participantsSchedule MP if plan has missing participants

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Part Three: Miscellaneous DisclosuresPart Three: Miscellaneous Disclosures

Minimum Funding NoticesMinimum Funding Notices Transfer of AssetsTransfer of Assets Disclosures Upon Participant RequestDisclosures Upon Participant Request

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Defined Benefit & Money Purchase Plans: Defined Benefit & Money Purchase Plans: Miscellaneous NoticesMiscellaneous Notices

Notice of Failure to Satisfy Minimum Funding Notice of Failure to Satisfy Minimum Funding RequirementsRequirements Late payment of minimum funding contribution to defined benefit Late payment of minimum funding contribution to defined benefit

or money purchase pension plan requires employer to issue or money purchase pension plan requires employer to issue notice to each participant and beneficiarynotice to each participant and beneficiary

Failure to issue notice: employer may be held liable to participant Failure to issue notice: employer may be held liable to participant or beneficiary up to $110 per dayor beneficiary up to $110 per day

Transfer of Excess Pension Assets to Health Benefit Transfer of Excess Pension Assets to Health Benefit AccountsAccounts Plan administrator must give 60 day advance notice to each Plan administrator must give 60 day advance notice to each

participant and beneficiary before transfer; civil penalty for participant and beneficiary before transfer; civil penalty for noncompliance of up to $110 per daynoncompliance of up to $110 per day

Sponsoring employer must notify DOL, IRS, plan administrator Sponsoring employer must notify DOL, IRS, plan administrator 60 days prior to transfer date detailing plan assets before and 60 days prior to transfer date detailing plan assets before and after transfer; employer may be held liable to participant or after transfer; employer may be held liable to participant or beneficiary for noncompliance in amount up to $110 per daybeneficiary for noncompliance in amount up to $110 per day

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General DisclosuresGeneral Disclosures Participant Request for Additional Plan InformationParticipant Request for Additional Plan Information

Plan administrator must furnish upon request copy of Plan administrator must furnish upon request copy of latest SPD, annual report, any terminal report, latest SPD, annual report, any terminal report, bargaining agreement, trust agreement, contract, or bargaining agreement, trust agreement, contract, or “other instrument under with plan is established or “other instrument under with plan is established or operated”operated”

Meaning of “other instruments”Meaning of “other instruments” Recent case law: restricted to formal or legal Recent case law: restricted to formal or legal

documents under which plan is established or documents under which plan is established or managedmanaged

Early case law: broadly interpreted to include “all Early case law: broadly interpreted to include “all documents helpful in determining rights, eligibility or documents helpful in determining rights, eligibility or interest in plan”interest in plan”

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General DisclosuresGeneral Disclosures

DOL Advisory Opinion 96-14A favors broad DOL Advisory Opinion 96-14A favors broad interpretationinterpretation

Penalties for NoncompliancePenalties for Noncompliance ERISA civil penalties for failure to make ERISA civil penalties for failure to make

required disclosures applyrequired disclosures apply Plan administrator subject to discretionary Plan administrator subject to discretionary

$110 per day penalty for failure to timely $110 per day penalty for failure to timely respond to proper request for documentsrespond to proper request for documents

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QuestionsQuestions