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401k 403b fiduciary obligations investments participants summary prospectus labor securities exchange commission Trust Regulatory News Providing Summary Prospectus Meets Fiduciary Obligation, Says DOL

(September 9, 2009--Chicago, IL) -- Providing 401k and 403b plan participants with an SEC-approved Summary Prospectus satisfies ERISA’s delivery obligations, according to the U.S. Department of Labor’s Field Assistance Bulletin 2009-03, issued yesterday.

Section 404(c) of ERISA protects fiduciaries from investment decisions made by participants or beneficiaries of individually directed plans if certain requirements are met. One of those obligations is that a participant or beneficiary be provided, or have the opportunity to obtain, sufficient information to make informed investment decisions under the plan. For investments in mutual funds, the DOL allowed fiduciaries to provide participants with a fund’s Profile, rather than the full prospectus. In January, the U.S. Securities and Exchange Commission eliminated the fund Profile and replaced it with an “enhanced” Summary Prospectus.

Under SEC rules, the enhanced Summary Prospectus is a short-form document required to be written in plain English, in a clear and concise format, and to provide a summary of key information about a mutual fund useful in evaluating and comparing plan investment options. They must provide an Internet link to the full prospectus as well as the ability to order one free of charge whether hard copy or via e-mail.

In FAB 2009-03, the DOL advises that a Summary Prospectus “satisfies the requirements of the ERISA section 404(c) regulations because the required contents of the Summary Prospectus provide key information about a mutual fund that will assist participants and beneficiaries in making informed investment decisions.”

The DOL notes that if a participant requests a prospectus, but the most recent prospectus received by the plan is a Summary Prospectus, then it can be provided to satisfy the request.

Since the expected use of a Summary Prospectus is in connection with a defined contribution plan, most copies will note on the cover that they are intended to meet the requirements for 401k and 403b plans, and variable contracts.

To view FAB 2009-03 (Click Here).

No statement in this issue is offered as or should be construed as legal opinion or advice or as an indicator of future performance.

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