Remember Communications Are Key
It’s hard work to build, maintain and administer a good retirement plan. But all that effort comes to naught in the absence of effective communications, and for a variety of reasons. A recent blog post offers some reminders of why.
In a recent PenChecks Trust blog entry, “Say it Loud and Clear — the Importance of Good Plan Communications
,” Carol Buckman argues that communications are critical to administering a retirement plan, but some notices and summary plan descriptions are poorly drafted nonetheless. She suggests why that is, and how one may avoid the complications attendant to poor communications.
Some plan communications are not optional, Buckman reminds, per ERISA. And that creates a risk greater than simply poorly informing participants and beneficiaries — failure to abide by ERISA regulations could spell lawsuits and other negative consequences, she warns. She adds that none other than the U.S. Supreme Court “has indicated that providing misleading communications can be a fiduciary breach” and adds for good measure that “there have been other instances where benefits not provided in the official plan document have been ordered to be paid out.”
And that’s not all, Buckman cautions — it also is possible to suffer monetary penalties for poorly written booklets and notices.
One way to avoid communications issues, she suggests, is to not fall into the trap of thinking that one size fits all. For instance, Buckman says, “SPDs are supposed to be self-contained documents, not a list of questions to ask the plan sponsor or check elsewhere.” Instead, she suggests, “fiduciaries and their legal counsel can modify the vendor documents to tell participants exactly which plan provisions apply to them and eliminate all references to provisions that don’t. This protects the fiduciaries and helps participants gain a better understanding of the plan.”
“As a plan fiduciary, you are responsible for ensuring plan communications compliance, which can be accomplished in a few simple steps,” Buckman argues. “Good plan communications will help you avoid unnecessary legal entanglements, and your participants will thank you for making the plan easier to understand.”