Request for Information – SECURE 2.0 Reporting and Disclosure: RIN 1210-AC23

October 9, 2023 

Office of Regulations and Interpretations
Employee Benefits Security Administration
Room N-5655
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC  20210

 Re: Request for Information – SECURE 2.0 Reporting and Disclosure: RIN 1210-AC23

To Whom it May Concern:

Below is the U.S. Chamber of Commerce’s (Chamber) response to the Department of Labor’s (DOL) Request for Information (RFI) published on August 11, 2023 in which DOL requested information relating to many of the reporting and disclosure requirements in SECURE 2.0. The Chamber appreciates DOL’s reaching out to the regulated community, and we look forward to working with DOL on these and other SECURE 2.0 implementation issues.

Pooled Employer Plans: Section 344

Under section 344 not later than 5 years after enactment and every five years after, the Secretary of Labor (Secretary) must conduct a study on the pooled employer plan (PEP) industry and report it to Congress, including:

• The legal name and number of PEPs;
• The number of participants in such plans;
• The range of investment options provided in such plans;
• The fees assessed in such plans;
• How employers select and monitor such plans;
• The disclosures provided to participants in such plans;
• The number and nature of any enforcement actions by the Secretary;
• The extent to which such plans have increased retirement savings coverage; and
• Any additional information the Secretary determines necessary.

In the RFI, the DOL acknowledged that much of this information is not publicly available, and DOL requested how it may be able to obtain this information. Much of this information is not publicly available because it is confidential and/or proprietary information. As such DOL must make every effort to keep information confidential and the reports to Congress should be on generalized, aggregated and deidentified basis.

Question 3
Question 3 asked what an efficient and comprehensive method would be for determining the range of investment alternatives (excluding investments in brokerage windows) provided in PEPs. There is concern that disclosure of investment options by PEP will expose each PEP up to adverse scrutiny from the plaintiffs’ bar. DOL should not list individual investments by each PEP, but instead report on the classes and types of investments available as required by the statute.

Question 4
Question 4 focused on how employers select a PEP. DOL asked for information on how PEPs are marketed to employers and whether the techniques vary by size. The RFI also asked whether employers rely on the advice of others, and, if so, whom?  The RFI asks what the most efficient way is to solicit information on the steps employers take to select and monitor PEPs and to stay in PEPs. DOL suggested a public hearing, focus groups, questionnaires, online polling or other techniques and from whom this information should be gathered.

To begin with, the process for selecting a PEP as a service provider generally is no different than selecting any other service provider, and the employer will look at a variety of factors in determining first whether to provide retirement benefits through a PEP, a single employer plan or a multiple employer plan. The employer, often with the assistance of a trained retirement specialist, such as consultants, lawyers, or CPAs, will review the services, costs, quality, and available investment lineups, among other factors, and then compare these with the needs of its population.

DOL should not have a public hearing on this topic because much of this information is proprietary and individualistic to each employer and a public hearing would provide an opportunity for the plaintiffs’ bar to solicit information for future lawsuits.  To obtain this information, we suggest DOL go directly to the PEPs, HR and benefits consultants and service providers such as accountants and lawyers, who work with employers. However, DOL should not attribute any responses to a particular PEP or consultant. If they do speak with individual employers, the names of the employers should be kept confidential.

Question 5
Question 5 asked whether there are additional disclosures that are provided to PEP participants and whether there is additional or different information that should be provided to PEP participants versus participants in other defined contribution plans. We do not believe that PEP participants should be treated any differently than any other participants with respect to required disclosures.

Question 6
SECURE 2.0 requires the study to focus on the extent to which PEPs have ‘‘increased retirement savings coverage in the United States.’’ In Question 6, DOL asked how they should  measure ‘‘increased retirement savings coverage’’ and what information DOL would need to make this assessment. As DOL noted, some employers may have changed from a single-employer plan to a PEP model, and this would not have increased coverage. However, many PEP providers track whether a new member is transferring an existing plan or whether it is a new plan. DOL could work with PEP providers on reporting this information every five years on an anonymous basis.

Emergency Savings Accounts Linked to Individual Account Plans: Section 127

 Section 127 created pension-linked emergency savings accounts (PLESA), which allow individuals to build up emergency savings in an account linked to an employer-sponsored retirement account.

Question 7
Question 7 asked what guidance plan administrators need to implement PLESAs, and, if so, what are the specifics and which agency (Treasury or DOL) should issue it. The following is a list of open questions and proposed answers relating to PLESAs.

• The statute provides that employees must meet “any age, service and other eligibility requirements of the plan” to enroll in a PLESA. DOL should clarify that a plan may have different eligibility conditions for making retirement and PLESA contributions (including more generous conditions to participate in PLESAs).
• The statute provides that contributions must be made within a reasonable time to the PLESA. Guidance on what is a reasonable time for making the contribution to the accounts and when distributions must be made after termination would be welcome. This guidance should provide a safe harbor that contributions made under rules applicable to elective deferrals will meet the safe harbor. With respect to distributions after termination, any guidance should provide that the distribution must be made within a reasonable time; however, no specific dates should be imposed because different administrators may need different timing.
• An individual who becomes an HCE may no longer make contributions. The statute uses the definition of HCE from Internal Revenue Code (Code) Section 414(q). Treasury should verify that an HCE for PLESA purposes is determined the same as under the Code and as elected by the retirement plan, namely for the compensation test the preceding year and may include the top 20 percent.
• The statute provides that there may not be a minimum contribution amount for a PLESA. However, most plans will provide that contributions must be a whole percentage of compensation or a round number (e.g., $50 per payroll).  DOL should clarify that the minimum contribution requirement does not preclude requiring contributions to be either a percentage of pay or a whole dollar amount.
• The statute provides that accounts may be ”subject to, as permitted by the Secretary of Labor [and Treasury], reasonable restrictions.” Plan sponsors will be reluctant to set up accounts until Treasury and DOL determine what, if any, restrictions will apply. However, we believe the statutory restrictions are sufficient, and no others are necessary from the Agencies.
• The Secretaries must issue regulations within 12 months related to the anti-abuse provisions which provide that plans may use “reasonable procedures” to limit the frequency or amount of the match on PLESA contributions to prevent these matching contributions from exceeding the plan’s intended amounts or frequency. Plans are not required to suspend matching contributions after participant withdrawals. DOL and Treasury should allow plans the maximum flexibility to implement procedures to deal with this. As such, DOL and Treasury should leave it to plans to devise their own procedures rather than applying a one size fits all approach.

Questions 8
Question 8 asked whether a model notice would be welcome. A model notice would be welcome, but it will need to be adjusted depending on a number of factors. Appendix A contains a model notice. 

Performance Benchmarks for Asset Allocation Funds: Section 318
Section 318 requires DOL to update its regulation under ERISA section 404 no later than two years after the date of enactment with respect to designated investment alternative that contain a mix of asset classes to allow the plan administrator to use a benchmark that is a blend of different broad-based securities if:

• The blend is reasonably representative of the asset class holding;
• In determining the 1, 5, and 10–year returns, the blend is modified at least once per year to reflect changes in the asset class holding;
• The blend is furnished reasonably calculated to be understood; and
• Each securities market index that is used for an associated asset class would separately satisfy the requirements of the regulation for the asset class.

Question 9
In the RFI, DOL asked whether there are other factors that plan administrators should use to ensure they can effectively select and monitor blended performance benchmarks. The DOL does not need to include other factors because this is dependent on the facts and circumstances of the particular investment. Furthermore, imposing additional conditions likely would discourage the use of blended benchmarks, contrary to Congressional intent.

Defined Contribution Plan Fee Disclosure Improvements: Section 340

This section requires DOL to review 29 CFR § 2550.404a-5, relating to fiduciary requirements for disclosures in participant-directed individual account plans, including how the content and design of the disclosures may be improved to enhance participants’ understanding of plan fees and expenses.  The report to Congress must include its findings and recommendations for legislative changes. 

Question 11
Question 11 asked whether the current information is adequate or inadequate in helping plan participants make informed investment decisions.  And, if it is inadequate, is there evidence that it is tied directly to the regulation as opposed to other factors impacting financial literacy. The current disclosure requirements provide individuals the information needed to make investment decisions. However, whether individuals are using the information is unclear. To address this open question, DOL should conduct focus groups of participants and beneficiaries to determine how they are using the current information and how they prefer to have it presented. The focus groups should be diverse and consist of individuals of various ages, education, profession, income, race, gender, religion, geographies, etc. These focus groups also should include questions related to overall financial literacy because that likely is a key factor in participants not understanding fees and disclosures.

Question 12
Question 12 asked whether there is evidence that the current regulation could or should be improved to help participant understanding, such as additional or different content or different design, formatting delivery, or other similar characteristics not currently required, and how should such information be incorporated. See above comment.

Question 13
Question 13 asked whether the model comparative chart in the current regulations is helpful in making meaningful comparisons, and, if not, how could it be improved or are there other disclosures that satisfy the regulation that are more effective. See above comment.

Elimination of Unnecessary Plan Requirements Related to Unenrolled Participants: Section 320.

For plan years on and after December 31, 2022, a plan is only required to provide the following documents to unenrolled participants:

• An annual reminder notice of eligibility to participate in the plan and any applicable election deadlines; and
• Any document the participant requests and is otherwise entitled.

The annual reminder must:

• Be furnished in connection with the plan’s annual open season election period or, if none, within a reasonable period before the beginning of each plan year;
• Notify the unenrolled participant of the participant’s eligibility to participate and the key benefits and rights on under the plan, focusing on employer contributions and vesting provisions; and
• Provide the information in a prominent manner calculated to be understood by the average plan participant.

An unenrolled participant is an employee who:

• Is eligible to participate in the plan;
• Has been furnished the SPD and any other notices related to eligibility required under ERISA or the Code;
• Is not enrolled in the plan; and
• Satisfies any other criteria the Secretary determines is appropriate.

Question 14
Question 14 asked whether there is any guidance that plan administrators need or would find helpful in implementing section 320. No additional guidance is needed other than an optional safe harbor of at least 30 days before the beginning of the plan year to provide the notice.

Question 15
Question 15 asked if there are additional criteria DOL should consider for determining who is an unenrolled participant? Given that the purpose of this section is to make plan administration easier and more streamlined, it would be counterproductive to add more criteria other than what is in the statute.

Question 16
Question 16 asked if there is additional information DOL should consider for inclusion on the required annual notice.  Again, if the purpose is to make administration easier, it would be counterproductive to require additional information other than what is in the statute.

Question 17
Question 17 asked if plan administrators would benefit from a sample notice, specifically with respect to “key benefits and rights under the plan, with a focus on employer contributions and vesting provisions.” Although this language is similar to the language in 26 C.F.R. § 1.401(a)(4)-4, which provides rules for nondiscrimination testing for availability of benefits, rights and features under plans, DOL should not include the broad definition included in the Treasury regulation in the notice provisions of Section 320. Instead, the annual notice should reiterate the employee’s right to participate in the plan, include a description or link on how to enroll and make elective deferrals, and include general information about employer contributions and vesting with a link to access specific plan information. Given that providing link will make the annual notice more accessible, a plan administrator should be able to default to provide the notice electronically, unless an individual asks for a paper copy.

DOL asks if a model is even feasible given the different plan designs. A model notice is included as Appendix B. 

Requirement to Provide Paper Statements in Certain Cases: Section 338
Effective for plan years after December 31, 2025, at least one pension benefit statement in a calendar year for an individual account plan and at least one pension benefit statement furnished every three years for a defined benefit plan must be furnished on paper, except for:

• Plans that furnish the statements under the safe harbor in 29 CFR § 2520.104b-1(c) (2002 safe harbor); or
• Plans that permit a participant or beneficiary to request the statement to be delivered electronically and the participant or beneficiary has made the request.

Section 338 also requires the Secretary of Labor to update the 2002 safe harbor to provide that for pension benefit statements to be delivered electronically for individuals who first become eligible to participate (or become a beneficiary) after December 31, 2025, in addition to the other requirements, the plan furnishes each participant or beneficiary a one-time initial notice on paper in written form of their right to request all documents required to be disclosed under ERISA be furnished on paper in written form.

The Secretary also must update all electronic notice guidance other than the 2002 safe harbor to the extent necessary to ensure that:

• A participant or beneficiary is permitted the opportunity to request that any disclosure required to be delivered on paper is furnished electronically;
• Each paper statement furnished under the plan must include:
• An explanation of how to request the statement and all required disclosures be delivered electronically; and
• Contact information for the plan sponsor, including the telephone number;
• A plan may not charge a fee to a participant or beneficiary for the delivery of any paper statement;
• Each document required to be disclosed that is furnished electronically includes an explanation of how to request all such documents be furnished on paper.

Question 19
Question 19 asked what modifications or updates to the 2002 safe harbor are needed to implement Section 338. For example, should additional information be included or other standards apply to the one-time notice. The DOL gave the example that the 2002 safe harbor be modified to include an initial paper notice that resembles the initial paper notice required by paragraph (g) of the 2020 regulations.

SECURE 2.0 only requires that DOL update the 2002 safe harbor to provide that for pension benefit statements to be delivered electronically for individuals who first become eligible to participate (or become a beneficiary) after December 31, 2025, the plan furnishes each participant or beneficiary a one-time initial notice on paper in written form of their right to request all documents required to be disclosed under ERISA be furnished on paper in written form. As such, any requirement for a one-time paper notice should only apply to such individuals and only with respect to pension benefits statements. The 2002 safe harbor has never required a one-time paper notice for the individuals who meet the “wired at work” requirements, and it should not be changed to require a paper statement for such individuals other than individuals hired after December 31, 2025 and only with respect to delivering benefits benefit statements. Furthermore, the 2002 safe harbor applies to all ERISA plans, and nothing in SECURE 2.0 directed DOL to change the delivery method for those plans.

To the extent that the 2002 safe harbor is updated to require a paper statement with respect to individuals hired after December 31, 2025 for pension benefits statements, any paper statement required under Section 338 should be allowed to be aligned with paragraph (g) of the 2020 safe harbor. A model integrated notice is included in Appendix C.

Question 20
Question 20 asked what modifications are needed to the 2020 safe harbor to implement Section 338. Other than requiring a one-time initial paper notice for certain participants as required by statute, there does not appear a need to update the 2020 safe harbor.

Question 21
Question 21 asked whether both safe harbors should be modified to condition use on an “access in fact”, meaning that plan administrators would need to reliably and accurately determine whether an individual actually accessed or downloaded the disclosure or the length of time the individual accessed the document. The answer to this is no because it is beyond ERISA’s disclosure requirements. Under ERISA, plan administrators’ disclosure obligations are to either “furnish” documents by operation of law or upon request or  to make them available for inspection at reasonable times and places.[1] The requirement to furnish a document does not include an obligation to determine whether someone actually opens or reads a document.

The long-time regulatory standard for delivery methods has been that the “the plan administrator shall use measures  calculated to ensure actual receipt of the material. There has never been a requirement that the plan administrator must show actual access or that a participant opened the disclosures or the amount of time a participant spent reading the disclosure, and it should not now apply to electronic delivery.

The same question asked whether the current safe harbors should be conditioned on the plan administrator monitoring whether individuals actually visited the specific website or logged onto the website as a condition of treating website access as effective disclosure. And, if such monitoring reveals that individuals have not visited or logged onto the specified website, should the safe harbors require plan administrators to revert to paper or take some other action in the case of individuals for whom plan administrators know forsake such access.  The answer to both of these is no. This is virtually an impossible requirement that would significantly add to the cost of plan administrator.  Plan sponsors do not have the staff or the capabilities of doing this, and it would need to be outsourced, which would cost additional money that ultimately will be passed onto participants. As noted above, there is nothing in any of the ERISA disclosures regimes that requires a plan administrator to monitor whether someone actually opens or reads a disclosure. Finally, according to one service provider, to build an email and website tracking and reporting of this magnitude, would be a multi-million dollar IT spend that would increase cost dramatically but do nothing to actual increase participant understanding.

Consolidation of Defined Contribution Plan Notices: Section 341  
No later than 2 years after the date of enactment, the Secretaries of Labor and the Treasury must adopt regulations providing that an ERISA plan may, but is not required to, consolidate 2 or more notices required under ERISA sections 404(c)(5)(B) (default investment notice) and Section 514(e)(3) (automatic contribution arrangement notice) and Code Sections 401(k)(12)(D) (safe harbor notice), 401(k)(13)(E) (qualified automatic contribution arrangement notice) and 414(w)(4) (eligible automatic contribution arrangement notice) into a single notice.

Question 22
Question 22 asked to what extent are regulations needed to implement this section. Other than providing a model notice, it does not appear that additional guidance is needed. The same question also asked what the administrative and legal impediments of consolidation are, which likely are that because each is a distinct requirement, it was assumed they would need to be separately accounted for. Finally, the question asked if there are other interested parties other than plans and participants. It is unclear what the point of this inquiry is, but there are no other interested parties with respect to this notice.

Information Needed for Financial Options Risk Mitigation: Section 342

Section 342 added a new ERISA Section 113 that requires advanced notice for plan amendments that offer a lump sum in place of annuity payments. It also requires disclosure to PBGC and DOL. The participant disclosure must include:

• Available benefit options, including the estimated monthly benefit at normal retirement age, whether there is a subsidized early retirement or QJSA, the monthly benefit amount if payment begins immediately and the lump sum amount;
• An explanation of how the lump sum was calculated including the interest rate, mortality assumptions, and whether any additional plan benefits were included, such as early retirement subsidies;
• The relative value of the lump sum option for a terminated vested participant compared to the value of an SLA and a QJSA;
• A statement that a commercial annuity comparable to the plan annuity may cost more than the amount of the lump sum and it may be advisable to consult an adviser;
• The potential ramifications of accepting the lump sum, including longevity risks, loss of PBGC protection, loss of protection from creditors, loss of spousal protection and loss of other ERISA protections;
• General tax rules related to accepting a lump sum, including rollover options and early distribution penalties and a disclaimer that this is not tax, legal or accounting advice with a suggestion that an adviser should be consulted;

• How to accept or reject the offer and the deadline; and

• Contact Information for the point of contact at the plan administrator.

The DOL and PBGC disclosure must include:

• The total number of participants and beneficiaries eligible for the lump sum option;
• The length of the lump sum window offered;
• An explanation of how the lump sum was calculated, including the interest rate, mortality assumptions, and whether any additional plan benefits were included, such as early retirement subsidies; and
• A sample of the participant notice.

Question 24
In question 24 DOL asked if there are any other “potential ramifications” of accepting the lump sum other than those listed in Section 113 (b)(1)(E) that should be included in the notice. Section 113(b)(3) provides that the “Secretary shall issue a model notice for purpose of subsection (a)(1).” However, it does not provide that the Secretary can add additional information not required by the statute. As such, no additional information should be included; however, the Secretary should provide that if plan sponsors wish to include additional information, doing so would not mean that they did not meet the notice requirements in Section 113.

Question 25
Question 25 asked whether transactional complexity, aging and cognitive decline and financial literacy are relevant factors DOL should consider when deciding to add to the list of potential ramifications. Although these factors could impact some individuals, they are just that, individual factors that cannot be addressed in a notice, other than by making the notices shorter and more to the point. Including more information likely will not help with these factors. DOL noted in the RFI the complexity of choosing between an annuity and a lump sum payment and asked whether there are ways to structure and present the notice that would increase the likelihood of better decisions and retirement outcomes.  Whether an annuity or a lump sum is a more appropriate option is highly individualized, and any notice should state that. There is no way that one notice can take into account every individualized situation, and the decision to accept either form ultimately is with the participant.

Question 26
Question 26 acknowledged that DOL must issue a model notice, and asks for samples of lump sum window notices. A model notice that includes only that information required by the statute is included in Appendix D. As noted above, in providing a model notice, DOL also should provide that it is not a breach of fiduciary duty to add additional information in the notice.

Question 27
In question 27, DOL asked whether DOL should use the 2015 ERISA Advisory Council Model Notice as a starting point for the Section 113 Model Notice. DOL should not use the 2015 Advisory Council Model Notice as a starting point. Although the Council meant this to be an unbiased model notice, it leans very strongly toward keeping an annuity payment rather than taking the lump sum. Instead, the starting point should be the statute itself, and only include those items listed in Section 113. However, DOL should make clear that a plan sponsor could include additional information, and such inclusion would not cause the plan administrator to incur a penalty under ERISA 502(c)(1) or be a cause of action under ERISA Section 502(a)(4).

Question 28
Question 28 asked what other data or information other than the number of participants who were eligible for the window should be reported to DOL and why. For example, DOL asked whether DOL should collect demographic information on who elected lump sums and why. DOL states this could enable DOL to provide Congress with more detailed information on the cohorts who did/did not accept lump sums.  DOL should realize that which companies offer lump sum windows and which employees accept them contains very personalized financial information about such individuals, and, as such, it should seek to obtain and make public only the information specifically listed in the statute. Furthermore, if Congress had wanted DOL to obtain other information, it would have specifically stated what that information should be.

Conclusion
The Chamber appreciates the opportunities to comment on the RFI, and we look forward to working with DOL on this and other SECURE 2.0 provisions.

Sincerely,
Chantel Sheaks
Vice President, Retirement Policy
U.S. Chamber of Commerce