Notice and disclosure requirements with respect to lump sum windows

(a)

In general

Part 1 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021 et seq.) is amended by adding at the end the following:

112.

Notice and disclosure requirements with respect to lump sum windows

(a)

In general

A plan sponsor of a pension plan that amends the plan to provide a period of time during which a participant or beneficiary may elect to receive a lump sum under clause (i) of section 401(a)(9)(A)(i) of the Internal Revenue Code of 1986, instead of future monthly payments under clause (ii) of such section, shall provide notice—(1)to each participant or beneficiary offered such lump sum amount, in the manner in which the participant and beneficiary receives the lump sum offer from the plan sponsor, not later than 90 days prior to the first day on which the participant or beneficiary may make an election with respect to such lump sum; and(2)to the Secretary and the Pension Benefit Guaranty Corporation, not later than 30 days prior to the first day on which participants and beneficiaries may make an election with respect to such lump sum.(b)

Notice to participants and beneficiaries

(1)

Content

The notice required under subsection (a)(1) shall include the following:(A)Available benefit options, including the estimated monthly benefit that the participant or beneficiary would receive at normal retirement age, whether there is a subsidized early retirement option or qualified joint and survivor annuity that is fully subsidized (in accordance with section 417(a)(5) of the Internal Revenue Code of 1986), the monthly benefit amount if payments begin immediately, and the lump sum amount available if the participant or beneficiary takes the option.(B)An explanation of how the lump sum was calculated, including the interest rate, mortality assumptions, and whether any additional plan benefits were included in the lump sum, such as early retirement subsidies.(C)In a manner consistent with the manner in which a written explanation is required to be given under 417(a)(3) of the Internal Revenue Code of 1986, the relative value of the lump sum option for a terminated vested participant compared to the value of—(i)the single life annuity, (or other standard form of benefit); and(ii)the qualified joint and survivor annuity (as defined in section 205(d)(1));(D)Whether it would be possible to replicate the plan’s stream of payments by purchasing a comparable retail annuity using the lump sum.(E)The potential ramifications of accepting the lump sum, including longevity risks, loss of protections guaranteed by the Pension Benefit Guaranty Corporation (with an explanation of the monthly benefit amount that would be protected by the Pension Benefit Guaranty Corporation if the plan is terminated with insufficient assets to pay benefits), loss of protection from creditors, loss of spousal protections, and other protections under this Act that would be lost.(F)General tax rules related to accepting a lump sum, including rollover options and early distribution penalties with a disclaimer that the plan does not provide tax, legal, or accounting advice, and a suggestion that participants and beneficiaries consult with their own tax, legal, and accounting advisors before determining whether to accept the offer.(G)How to accept or reject the offer, the deadline for response, and whether a spouse is required to consent to the election.(H)Contact information for the point of contact at the plan sponsor for participants and beneficiaries to get more information or ask questions about the options.(2)

Plain language

The notice under this subsection shall be written in a manner calculated to be understood by the average plan participant.(3)

Model notice

The Secretary shall issue a model notice for purposes of the notice under subsection (a)(1), including for information required under subparagraphs (C) through (F) of paragraph (2). (c)

Notice to the Secretary and Pension Benefit Guaranty Corporation

The notice required under subsection (a)(2) shall include the following:(1)The total number of participants and beneficiaries eligible for such lump sum option.(2)The length of the limited period during which the lump sum is offered.(3)An explanation of how the lump sum was calculated, including the interest rate, mortality assumptions, and whether any additional plan benefits were included in the lump sum, such as early retirement subsidies.(4)A sample of the notice provided to participants and beneficiaries under subsection (b).(d)

Post-Offer report to the Secretary and Pension Benefit Guaranty Corporation

Not later than 90 days after the conclusion of the limited period during which participants and beneficiaries in a plan may accept a plan’s offer to convert their annuity into a lump sum as generally permitted under section 401(a)(9) of the Internal Revenue Code of 1986, a plan sponsor shall submit a report to the Secretary and the Director of the Pension Benefit Guaranty Corporation that includes the number of participants and beneficiaries who accepted the lump sum offer and such other information as the Secretary may require.(e)

Public availability

The Secretary shall make the information provided in the notice to the Secretary required under subsection (a)(2) and in the post-offer reports submitted under subsection (d)(1) publicly available in a form that protects the confidentiality of the information provided.(f)

Guidance and regulations

The Secretary—(1)not later than 180 days after the date of enactment of this section, shall issue guidance and model notices for plan sponsors to use in providing the notice described in subsection (b); and(2)may promulgate such other regulations as may be necessary to carry out this section.(g)

Biannual report

Not later than 6 months after the date of enactment of this section and every 6 months thereafter, so long as the Secretary has received notices and post-offer reports under subsections (c) and (d), the Secretary shall submit to Congress a report that summarizes such notices and post-offer reports during the applicable reporting period.

(b)

Clerical amendment

The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 111 the following new item:

Sec. 112. Notice and disclosure requirements with respect to lump sum windows.

(c)

Enforcement

Section 502 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is amended—(1)in subsection (c)(1), by striking or section 105(a) and inserting , section 105(a), or section 112(a); and(2)in subsection (a)(4), by striking 105(c) and inserting section 105(c) or 112(a).(d)

Effective date

The amendments made by subsections (a), (b), and (c) shall take effect on the date of enactment of this Act. (e)

Regulatory authority

Not later than 1 year after the date of enactment of this Act, the Secretary of the Treasury and the Secretary of Labor shall jointly issue regulations to implement section 112 of the Employee Retirement Income Security Act of 1974, as added by subsection (a). Such regulations shall require plan sponsors to comply in good faith with the regulations beginning not later than 1 year after issuance of a final rule with respect to subsections (a)(1) and (b) of such section 112, and beginning not later than 6 months after issuance of a final rule with respect to subsections (a)(2), (c), (d), and (e) of such section 112.