Pension Protection Act Guide - January 2009 - (Page 19)

Pension Protection Act Guide – Defined Contribution (DC) Plans SpEcIfIc poINtS EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you INvEStmENtS continued fiduciary Responsibility for Investment Advice for plan years beginning on or after January 1, 2007 Generally, an investment adviser who provides advice to invest in specific securities or vehicles that pay additional fees to the adviser or an affiliate of the adviser could violate ERISA. Plan sponsors who hire investment advisers have a fiduciary responsibility to prudently select and monitor the adviser. In addition, under ERISA, a plan sponsor could be liable for the fiduciary breaches of advisers they have hired. Diversification Rights of Investments in Publicly Traded Employer Securities for plan years beginning on or after January 1, 2007 (delayed for collectively bargained plans) DC plans generally can hold 100% of their retirement funds in employer stock, with limited (in the case of ESoPs) opportunity given to participants to diversify into other investment options. • Employees must be able to diversify (out of employer stock) the investment of their own contributions and elective deferrals immediately. • After three years of service, they must be able to diversify the investment of matching and non-elective contributions. • Plans must have at least three diversified investment options other than publicly traded employer securities. (N/A to privately held companies, stand-alone ESoPs, and single-participant plans.) • Diversification rights may be phased in over three years for stock acquired with matching and non-elective contributions prior to 2007. The three-year permissible phase-in is N/A to participants 55 or older with three years of service. • Participants with employee contributions or three years of service must be notified at least 30 days prior to their eligibility for diversification. Statutory relief against fiduciary liability is provided if a participant’s investments are mapped to similar investments if: • The participant has the right to direct investments; • The participant is given written notice of the change between 30-60 days before the change; • The participant has not elected investment options contrary to the proposed elections prior to the change date. A plan fiduciary does not fail to meet his fiduciary responsibilities if: • he allows investment advice and the adviser meets the prohibited transaction requirements. • The adviser acknowledges in writing that he is a fiduciary of the plan. • Fiduciaries are still subject to general fiduciary requirements of prudent selection and periodic review of a fiduciary advisor. • You would not have a duty to monitor the specific advice given by the fiduciary advisor to any recipient of such advice. • As under current law, you must engage in periodic review of the specific advice and the provider of such advice. Note: We are a fiduciary with respect to selection and monitoring of our foundation investment options that you may have as part of your investment platform. This is a significant change for plans offering publicly traded employer stock as an investment option. Employees must be given choices they previously didn’t have, and employers will need to communicate these changes as well as provide timely notice to affected participants. Mapping of Investment options for plan years beginning on or after January 1, 2008 (delayed for collectively bargained plans) Plan sponsors have no statutory fiduciary protection during a blackout period or when participant investment options are mapped to new investment options without an affirmative election from plan participants. • Plan sponsors can take advantage of this statutory relief only by following the new rules. Note: We can help you by providing a wide array of investment options and assisting with participant education. partIcIpaNt NotIcES/commuNIcatIoN Blackout Notices Immediately Plan Administrators must send notice of a “blackout period.” Blackout notices are no longer required to be sent to single-participant or partner-only plans. This change is retroactive to the effective date under the Sarbanes oxley Act of 2002. • Blackout notices are not required in all situations. for single-participant or partner-only plans, the step to provide such notice can be eliminated. 19

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Pension Protection Act Guide - January 2009 Contents Multiple Plan Types Defined Benefit (DB) Plans Defined Contribution (DC) Plans Employer Securities Nonqualified Individual Investors

Pension Protection Act Guide - January 2009

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