DoL Allows Use of Summary Prospectus for DC Plans

The Department of Labor has approved the use of the new mutual fund Summary Prospectus to satisfy the prospectus delivery requirement for defined contribution plans. In Field Assistance Bulletin No. 2009-3, the DoL has indicated that the new Summary Prospectus conceived by the SEC will satisfy a fiduciary’s obligations to delivery a prospectus as required by Section 404(c) and its accompanying regulations. The DoL indicated that the legend on the front cover may include a statement that the Summary Prospectus is “intended for use in connection with a defined contribution plan that meets the requirements for qualification under Section 401(k)” of the Internal Revenue Code.

OUR TAKE: It’s a good thing that the DoL will allow the delivery of the Summary Prospectus. Otherwise, the SEC’s initiative would have been rendered essentially moot as a large percentage of mutual fund investors are represented by 401(k) plans. We recommend including the legend described above.

http://www.dol.gov/ebsa/regs/fab2009-3.html