ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.
A recent call with an advisor in Maryland involved a question on participant education. The advisor asked: “I just attended a training meeting where the speaker mentioned an Education Policy Statement (EPS). Is a plan required to have an EPS?”
Highlights of Discussion
- While the DOL does not require 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.
Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Consumers should consult with their tax advisor or attorney regarding their specific situation.
©2023, Retirement Learning Center, LLC. Used with permission.
