Case of the Week: Education Policy Statements

The ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in Illinois is representative of a common inquiry regarding 401(k) plans and participant investment education. The advisor asked:

“What is an Education Policy Statement for a 401(k) plan and does the Department of Labor (DOL) require a plan have one?”

While the DOL does not requirement qualified retirement plans to have an education policy statement (EPS), it can be a helpful fiduciary liability reduction tool for plan sponsors who offer plan participants the ability to self-direct their account balances. It is often viewed as an extension of a plan’s investment policy statement. The EPS is the blueprint for how the fiduciaries of the plan will implement, monitor and evaluate an employee education program with respect to the plan.

ERISA 404(c) provides a mechanism for plan sponsors to shift investment responsibility to participants, provided the plan meets certain requirements. Generally, to meet the requirements of ERISA 404(c), participants must have the opportunity to: (1) exercise control over their individual account; and (2) choose from a broad range of investment alternatives (DOL Reg. 2550.404c-1). As part of the ability to exercise control, participants must have “…the opportunity to obtain sufficient information to make informed investment decisions.” The EPS can be the means by which plan fiduciaries document how this requirement is met.

While there is no prescribed format for an EPS, answering the following questions may be helpful in designing the document:

  • What is the purpose of the EPS?
  • What are the objectives of the EPS?
  • What are the educational goals?
  • Who are the responsible parties and what are their duties?
  • How will the education be delivered?
  • How will results be measured?

Conclusion

An EPS is a blueprint for how plan fiduciaries will implement, monitor and evaluate an employee education program with respect to a retirement plan. Although not required, an EPS could be a prudent addition to a plan sponsor’s fiduciary fulfillment file.

The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation.

Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.

Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.

©2017, Columbia Management Investment Advisers, LLC. Used with permission.

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