Benefit Statements for Defined Benefit Plans – When to Send and What to Say

Section 105 of the Employee Retirement Income Savings Act of 1974 (“ERISA”) (29 U.S.C. §1025) requires the plan administrator for defined benefit plans, such as pension plans, to provide benefit statements to the participants and beneficiaries of the plan. The benefit statement is essentially a notice that contains information about the plan, including the rights of the participants and the benefits available to the participant or beneficiaries, among other information.

What Information Should the Benefit Statement Include?

The benefit statement for defined benefit plans must include the most recently available information regarding the total benefits accrued. The statement must also include the participant’s vested pension benefits, or—for a participant that has not vested—the earliest date on which the benefits will vest.

In addition, the benefit statement must include an explanation of any disparity permitted under 26 U.S.C. §401(l) used to determine the accrued benefit. In the alternative, the benefit statement must include any floor-offset arrangements that may be used to determine the accrued benefit.

When Should the Benefit Statement Be Sent?

The plan administrator must furnish the benefit statement to the participant or beneficiary upon written request. In addition, the plan administrator must send the benefit statement to each participant with a vested accrued benefit at least once every three (3) years. However, plans can avoid this requirement if the administrator notifies the participants at least once a year that the statement is available online and explains how to obtain the pension benefit statement.

Key Takeaways:

Defined benefit plans are required to provide pension benefit notices to participants and beneficiaries enrolled in the plan. The statement must contain information regarding the accrued benefits and the participants vested pension benefits. As is true with most documents under ERISA, the plan administrator is required to provide the benefit statement to the participant upon written request. The statement must also be provided at least once every three years, unless notice pertaining to the availability of the statement is provided to the participant at least once a year. The benefit statement can be delivered in writing, electronically, or in another reasonably accessible form. In addition, the statement must be written in manner that is understandable to the average participant.