Newark, NJ (PRWEB) September 15, 2009
Prudential Financial, Inc. today called for government reform of pension plan regulations to guarantee participants disclosures that are relevant, timely and succinct.
In testimony before the U.S. Department of Labor's ERISA Advisory Council, a team of three Prudential Retirement executives said the Department of Labor, the U.S. Treasury and the Securities and Exchange Commission need to better coordinate retirement plan notice and disclosure requirements.
"We strongly urge active and coordinated pursuit of any actions needed to bring about improvements to required participant notices and general retirement literacy," said Michelle Morey, vice president of participant Communications for Prudential Retirement, a business unit of Prudential Financial (PRU:NYSE).
Morey testified before the council along with colleagues, Michael Taricani, vice president of regulatory and consulting services, and Dan Fontaine, project management director.
Morey's testimony underscores the need for substantial improvement to plan disclosures. Prudential Retirement recommended:
*Sensitivity to differences between actively-engaged and passive participants:
Prudential highly regards the structure established by the Pension Protection Act (PPA) of 2006 that allows all participants to achieve retirement security, but recommends simplifying required notices to help less engaged participants -- the very target audience for the notices -- understand them better. While easy access to fundamental plan information is important, we must write the notices to respect the way the target audience processes and uses information. In addition, while improved communication can be achieved through regulatory modifications, retirement literacy cannot be created by regulation.
Give plan sponsors and their retirement service providers the ability to communicate plan information in a simple format that ensures all participants will read it and that provides easy access for more engaged participants to get more in-depth levels of information. Prudential recommends this model for required notices, along with expanding regulators' acceptance of continuous electronic access to plan information as an effective means of communication to this audience and a cost-reducing way for plan sponsors to fulfill their notice obligations.
*Freedom From Arbitrary Requirements:
Give plan sponsors the ability to provide disclosure notices at a time when they are most pertinent (for example, in conjunction with an investment education seminar) or when participants are more likely to read them. Sponsors should be free to send certain annual disclosures to participants at any time of the year, instead of within narrow window time frames, typically at year-end. Required notices should also contain a singular, core message free from competing themes.
*Coordination Between Regulatory Agencies:
All appropriate regulatory agencies, including the Department of Labor, the Treasury Department and the Securities Exchange Commission should coordinate all notice and disclosure requirements wherever possible and however necessary--even if legislative changes are needed.
"In our testimony we outlined a comprehensive plan that would help plan sponsors combat current challenges they face meeting notice requirements," Morey said. "If enacted, plan sponsors would see reduced costs that would improve plan efficiency and performance."
Prudential believes that participants should have the opportunity to learn about all the features of their plan--including vesting rules and distribution options--helping improve their financial literacy. Requiring these details to be included in any notice, however, makes the notice longer and dilutes the notice's key message, which often leads to participant confusion.
"The current disclosure notice process provides the potential for better-informed participants but there is substantial room for improvement," said Michael Taricani, vice president of regulatory and consulting services for Prudential Retirement. "Participants will only be better-informed if they read a notice and understand it. Notices need to be relevant, brief and delivered in a timely, effective manner --which will encourage participants to read them and in turn, become more knowledgeable."
The U.S. Department of Labor's ERISA Advisory Council, which is charged with making policy recommendations to the Secretary of Labor on retirement security issues, heard testimony from industry experts, including Prudential's executives.
Prudential Retirement delivers retirement plan solutions for public, private, and non-profit organizations. Services include state-of-the-art record keeping, administrative services, investment management, comprehensive employee investment education and communications, and trustee services. With over 85 years of retirement experience, Prudential Retirement helps meet the needs of more than 3.7 million individual plan participants and annuitants and more than 6,800 defined benefit and defined contribution plans. Prudential Retirement has $160.4 billion in total retirement account values as of June 30, 2009.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with approximately $580 billion of assets under management as of June 30, 2009, has operations in the United States, Asia, Europe, and Latin America. Leveraging its heritage of life insurance and asset management expertise, Prudential is focused on helping approximately 50 million individual and institutional customers grow and protect their wealth. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. For more information, please visit http://www.news.prudential.com/
Prudential Retirement, Prudential Financial, PRU, Prudential and the Rock logo are registered service marks of The Prudential Insurance Company of America, Newark, NJ and its affiliates. Prudential Retirement is a Prudential Financial business.
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