How to Avoid Misunderstanding and Misinformation

When Jodi Epstein scans drafts of communications from her plan sponsor clients to update retirement plan participants about changes, it’s not unusual for her to find errors.

“I always have edits for clarity, accuracy and consistency with the plan documents,” says Epstein, a Washington, D.C.-based partner in the employee benefits group at law firm Ivins, Phillips & Barker.

At a time when: retirement plans tend to be standardized; companies often rely on prototypes, pre-approved plans or pooled employer plans; and communications are also standardized, attorneys and consultants stress the importance of a careful review. They caution about the need to avoid potential miscommunication and misinformation and the need to comply with the Employee Retirement Income Security Act’s guidelines.

Establish a Method

For Elizabeth S. Goldberg, a Pittsburgh-based partner in the employee benefits and executive compensation practice at Morgan, Lewis & Bockius, the first step to creating good communications is establishing a good process.

“Like so many things in the ERISA fiduciary world, it really does come down to process,” Goldberg says. “It starts with having a good process before you even get to the point where you’re reviewing communication.”

When working to establish best practices for communications, she recommends plan sponsors develop a pre-set plan that helps ensure the committee members or trustees are engaged. This could include agreeing to multiple committee meetings during the year, adhering to a committee charter, working carefully to keep minutes and participating in fiduciary training.

“You’re better equipped to meet the moment when it comes time to consider a communication change,” Goldberg says. In her view, communication falls under the fiduciary duty of loyalty, and she suggests regarding it from the lens of: What is in the best interest of the participants?

When evaluating disclosures, it then raises a question of how are the participants going to receive it and will the disclosure enable them to understand what the plan sponsor is trying to communicate?

Lastly, she looks at the fiduciary duty of prudence, under which she considers, “Is this a good method of communicating?” For instance, are you giving participants enough time to respond to the changes? If you have a significant change in the plan with a long runway to roll it out, Goldberg says it helps to plan multiple forms of communication.

“If the committee is not regularly engaged—not meeting a couple of times a year—they’re more likely to fall victim to not being attuned to updates they need to be thinking about,” Goldberg says.

Without regular meetings, they may miss the need to communicate in a certain way or may not fully understand why there are changes. They may rely on outside experts without fully understanding why they are recommending a change.

“It’s great to use experts,” she says, but she urges committee members to keep “reviewing what [you’re] doing and making sure you understand it.”

The Importance of Clarity

Epstein says she sees the need for someone at the sponsoring company—a fiduciary or a counsel—to review any communications to reduce the possibility of error or participant confusion. In a recent example, Epstein recalls reading a blackout notice for a fund change and spotting that the template stated that participants would be unable to take loans during the blackout period.

“Well, the plan doesn’t allow loans ever,” Epstein says. “It’s this mismatch where sometimes the notices that get produced are over-broad, so they have provisions you don’t need.”

At the same time, Epstein searches for omissions. For example, when there is a fund change, there should be information about where a participant should go on the plan’s website to make an investment change, she says. Her aim is to clarify and improve accuracy, and she adds that often, she is adding the plan name in the notice or adding missing dates and contact information such as a phone number and website. She also relies on a one-page document she drafts for herself for every plan that typically includes a chart with details such as headcount assets, vendors, basic plan statistics and plan terms, as well as information about withdrawal and loan features.

“I’m not trying to just wordsmith something, … it’s about compliance,” Epstein says. “These notices are supposed to be understandable by participants, and sometimes there’s a bunch of gobbledygook that is not even applicable to the plan.”

Know the Source Material

Julia Zuckerman, a Washington, D.C.-based vice president and senior consultant in the compliance practice at human resources consultancy Segal, also emphasizes the importance of relying on the plan documents for guidance.

“The first place to look is the plan documents themselves,” she says, recommending that plan communications should include language referring to the plan documents, ideally including a link to them.

While each plan has its own processes and may depend on in-house review, outside counsel or a communications consultant, Zuckerman advises legal review.

“The consequences of a mistake or miscommunication can be substantial,” Zuckerman says. “Specific consequences depend on what is communicated. If a benefit is communicated that is not actually part of the plan, it could open up liability to pay that.”

Zuckerman attempts to strike a balance between two goals: risk management and drafting readable prose.

“Most things, if you can’t say them in a straightforward manner, people may not understand,” she says. Instead, she thinks about how to communicate, “as if you were talking to a neighbor.”

Zuckerman works on this effort with her colleagues, including Megan Yost, a Boston-based senior vice president of thought leadership and insights at Segal.

“As communications consultants, we lean on experts from legal and compliance to make sure materials comply with ERISA and align with plan documents,” Yost wrote in an email response to questions. “We work closely with them to make sure details are technically accurate but said in the simplest way possible. It’s an important partnership, and it’s helpful to involve them earlier in the process rather than later. That way you can work together to strike a balance between plain language and technical accuracy.”

More on this topic:

	Communication Liability Falls to the Plan Sponsor
	Education vs. Advice: The Difference Matters
	Retirement Plans’ Communication Dilemma: Mail, Email or Both?