The Department of Labor ("DOL") issued a final regulation under ERISA section 101(k) requiring the plan administrator of a multiemployer plan to provide copies of certain actuarial and financial documents after receipt of a written request. Generally, the covered documents must be provided not later than 30 days after receipt of the written request. The new regulation is effective April 1, 2010. Under the law, and regulations issued last year, the DOL may assess a penalty of up to $1,000 a day for each violation of the requirement to provide documents.

Persons entitled to information

The following individuals and entities are entitled to request the actuarial and financial documents:

1. A plan participant;

2. Any beneficiary receiving benefits;

3. Any labor organization representing participants under the plan; and

4. Any employer that is party to the collective bargaining agreements pursuant to which the plan is maintained or who otherwise may be subject to withdrawal liability.

Available Documents

The documents that must be made available are any:

1. Actuarial reports prepared by an actuary of the plan and received by the plan at regularly scheduled, recurring intervals; and any study, test (including a sensitivity test), document, analysis or other information (whether or not called a "report") received by the plan from an actuary of the plan that depicts alternative funding scenarios based on a range of alternative actuarial assumptions, whether or not such information is received by the plan at regularly scheduled, recurring intervals;

Cheiron observation: The DOL views actuarial reports as including not only the annual valuation report and the notice of status (critical, endangered, or neither) prepared by the plan actuary, but also any documented sensitivity testing that the plan may have received.

2. Quarterly, semi-annual, or annual financial reports prepared for the plan by any plan investment manager or advisor (without regard to whether such advisor is a fiduciary) or other fiduciary; and

Cheiron observation: It appears this would have application to multiemployer defined contribution plans as well as defined benefit plans.

3. Application filed with the Secretary of the Treasury (under ERISA section 304 and IRC section 431(d)) requesting an extension of the amortization period and the determination of the Secretary pursuant to the application.

Limitations

The new regulations contain some limitations on the documents that must be disclosed. Accordingly, the following do not have to be furnished:

1. Any report or application furnished to the requester within the previous 12 months;

2. Any report or application that has been in the plan's possession for six years or more;

Cheiron observation: The six-year cut-off reflects the statutory requirement (elsewhere in the law) that information used to provide reports and certifications need be kept for only six years. However, this does not affect the requirement of section 209 of ERISA which effectively requires that the plan keep records pertinent to the determination of benefits.

3. Any actuarial report or financial report that has not been in the plan's possession for at least 30 days (however, the plan has to inform the requester not later than 30 days after receipt of the request of existence of the document and the earliest date on which the document can be furnished by the plan);

Cheiron observation: This provision gives the plan an opportunity to review the document before it is disclosed.

4. Any information or data which served as the basis for any report or application that must be disclosed (although this does not limit other rights that a person may have to review or obtain information under the law);

Cheiron observation: This also would not affect the requirement to furnish information under applicable standards of practice.

5. Any information within a report or application that the plan administrator reasonably determines to be individually identifiable information with respect to any plan participant, beneficiary, employee, fiduciary, or contributing employer, except that such limitation shall not apply to an investment manager, advisor, or other person (other than an employee of the plan) preparing a financial report; and

6. Any information within a report or application that the plan administrator reasonably determines to be proprietary information regarding the plan, any contributing employer, or entity providing services to the plan.

Proprietary information is defined to mean trade secrets and other non-public information (for example, processes, procedures, formulas, methodologies, techniques, or strategies) that, if disclosed, may cause, or increase a reasonable risk of, financial harm to the plan, a contributing employer, or entity providing services to the plan. The plan administrator may treat information relating to a contributing employer or entity providing services to the plan as other than proprietary if the contributing employer or service provider has not identified the information as proprietary. The plan administrator has to inform the requester if any information is withheld as being individually identifiable information or proprietary information.

Cheiron observation: The preamble states that the DOL believes that the use of the proprietary information exception will be rare. This exception may have a greater application to investment advisors who employ proprietary investment strategies and tools. It should be anticipated that an entity providing services to the plan will need to specify to the plan administrator, which, if any, information it regards as proprietary. We will be reviewing our own reports to clients to determine whether there is any information that we regard as proprietary, but anticipate that there will be little such information.

Reasonable Charges

The plan administrator may impose a reasonable charge to cover the costs of furnishing the documents subject to certain limits. The charge may not exceed the lesser of (A) the actual cost to the plan for the least expensive means of acceptable reproduction of the document or documents or (B) 25 cents per page, plus the cost of mailing or delivery of the document. The regulation cross-references DOL regulation 2520.104b-1 for the manner of furnishing the documents. That regulation contemplates the possibility of furnishing information electronically.

Cheiron observation: A plan may have to ascertain the cost of printing out a document that is delivered to the plan electronically. Also, the regulation leaves open the question of the cost of furnishing information electronically.

Conclusion

Plan administrators should act immediately to review documents for information that must be available pursuant to the new regulation. As part of such a review, plan administrators should determine what information should be withheld from a report or application in the event that the document is requested. Furthermore, plan administrators should consider what charges will be made for any documents requested under the regulation and how the charges compare with charges for other documents.

See other timely articles in our Spring Client Advisory.