DOL expected to issue retirement distribution guidance soon

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 last week at MetLife Inc.’s seventh National Benefits Symposium in Washington.

The Labor Department has set no hard date for when it will release the guidance, but the regulator’s proposed rule to expand the term “fiduciary” has brought up questions about how best to guide employees through retirement plan distribution events, he said.

Currently, the Labor Department uses 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 addresses only 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 Labor Department had questioned whether the proposal ought to apply to rollovers, giving rise to the upcoming distribution guidance, he said.

JUMPING-OFF POINT

This summer, the Labor Department is likely to propose a regulation on benefit statements for DC plans, Mr. Delaplane said. But the agency is likely to use that regulation as a way to address the use of annuity illustrations — a method to translate participants’ retirement balances into income.

The Labor Department hasn’t 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 existing regulations on electronic delivery of participant notices. The agency’s current regulation on e-delivery is relatively stringent, compared with similar regulations at the Treasury Department and Internal Revenue Service, Mr. Delaplane said.

Labor Department spokeswoman Gloria Della didn’t return a call seeking comment.

E-mail Darla Mercado at [email protected].