In Field Assistance Bulletin 2009-03 (Sept. 8, 2009), the U.S. Department of Labor (DOL) approved the use of a summary prospectus (under the new disclosure framework for mutual funds published by the Securities and Exchange Commission in January 2009) to satisfy the prospectus delivery requirement of the regulations under the Employee Retirement Income Security Act of 1974 (ERISA) § 404(c) safe harbor for participant-directed retirement plans. By way of background:
- Where applicable, a summary prospectus is an optional means of compliance with the prospectus delivery requirements of the Securities Act of 1933 (1933 Act), under Rule 498.
- ERISA § 404(c) relieves plan fiduciaries from liability for the consequences of investment decisions made by participants for their own retirement accounts if the plan permits and the participant exercises control over the assets in that account.
- Among other requirements in the regulations elaborating the circumstances in which participants have and exercise the requisite control, an identified plan fiduciary (or designee) is to furnish to the participant, contemporaneously with the participant’s initial investment in a mutual fund (or other investment option registered under the 1933 Act) and at other times on request, a copy of the prospectus most recently provided to the plan.
- In a 2003 advisory opinion, DOL concluded that a mutual fund profile (under former Rule 498 of the 1933 Act) could be used to satisfy this prospectus delivery requirement.
In Field Assistance Bulletin 2009-03, DOL reached the same result for a summary prospectus (at least if that is the most recent prospectus received by the plan), reasoning that: (i) the term “prospectus” is not defined in the regulation; and (ii) the required contents of a summary prospectus provide, in a concise and plain English format, both key information about the fund and a Web-site address (and other means) to obtain more information, including the statutory prospectus.