DOL expected to issue guidance for retirement plan distributions

The Labor Department is expected to release distribution guidance aimed at plan participants as they exit defined-contribution plans, according to a well-known employee benefits attorney. “The fiduciary regulation is putting pressure on distribution education,” James M. Delaplane Jr., a partner at Davis & Harman LLP, said today at MetLife Inc.'s seventh National Benefits Symposium in Washington. He noted that the DOL has set no hard date for when it will release the guidance, but that the regulator's proposed rule to expand the term fiduciary has brought up questions on how best to guide employees through retirement plan distribution events. Currently, the Labor Department has its Interpretive Bulletin 96-1, which identifies what types of investment information and materials do not constitute investment advice for plan participants. However, that guidance only addresses accumulation. “What can we say about distribution without providing advice? That's what you'll see from the DOL,” Mr. Delaplane said. In its proposed rule to redefine who is a fiduciary, the DOL had questioned whether the proposal ought to apply to rollovers, giving rise to the upcoming distribution guidance, Mr. Delaplane added. He also noted that this summer, the DOL is likely to propose a regulation on benefit statements for defined-contribution plans. But the regulatory agency is likely to use that regulation as a jumping-off point to address the use of annuity illustrations — a way to translate participants' retirement balances into income. The DOL has not committed to the annuity illustration, but it may take action, Mr. Delaplane said. Finally, the Labor Department soon will put forward a request for information on whether it should update its current existing regulations on electronic delivery of participant notices. The current DOL regulation on e-delivery is relatively stringent, compared with similar regulations at the Treasury Department and Internal Revenue Service, Mr. Delaplane said. “It's less electronic delivery with less frequency." Currently, the regulation requires consent from employees to receive participant documents via e-delivery, or that the computer be an integral part of the workplace. “We have some skeptics of e-delivery at the Labor Department; we're going to have our work cut out for us there,” Mr. Delaplane added. A call to Labor Department spokeswoman Gloria Della was not immediately returned.