A Health Checklist for your Benefit Plan

As we are approaching the end of summer and the beginning of fall planning, have you considered the health of your employee benefit plan in your list of to-do’s? A study published by Fidelity Investments entitled 2017 Plan Sponsor Attitudes, showed that approximately 40% of companies in North America are not confident in their understanding of plan fiduciary responsibilities. However, a continued rise in seeking professional third party assistance to consult on benefit plans design and performance, showed approximately 90% of plan sponsors are considering hiring new retirement plan advisors and implementing plan design changes to meet the ever changing requirements of the Department of Labor (“DOL”) and the 1974 Employee Retirement Income Security Act (ERISA).

So, where does this leave you with your company’s plan and fiduciary responsibilities, as the plan sponsor? Let’s review some of the top areas where you should do a health assessment, to ensure your plan is dotting its I’s and crossing its T’s to a clean bill of health.

Understanding Your Fiduciary Duty

As the plan sponsor, it is your fiduciary duty to be educated on your roles and responsibilities with monitoring the administration of your company’s employee benefit plan.

  • All plan documents are up to date: your adoption agreement, plan document and summary plan description should be reviewed by your ERISA legal counsel to ensure these documents are complying with the latest requirements of the Internal Revenue Service (“IRS”) and the DOL ERISA regulations.
  • Ensure you understand all options established in your plan adoption agreement and plan document, including knowing:
    • When/how employees can enter the plan
    • Types of allowable contributions (Roth, rollovers, etc.)
    • Vesting schedule for participants
    • Employer matching calculation,
    • Safe harbor provisions in your plan, if any
    • Loans provisions: if they are allowed in the plan, the limits on them (number of loans allowed and total balances to be loaned)
    • How/when benefits can be paid from the plan, including when terminated participants can have deemed distributions from the plan through payment of balances remaining <=$5,000 or automatic rollovers of balances <=$5,00
  • Verifying your 3rd party service providers are fulfilling their contractual obligations
    • Are the Form 5500 filings being completed and filed timely (due by July 31st with extension to October 15th)
    • Are all appropriate annual disclosures being provided to all participants in the plan
      • Summary Plan Description
      • Summary of Material Modification
      • Employee plan statements
      • Summary annual reports of the plan
      • Black out notices
      • Auto enrollment forms, as applicable
  • Ensuring timely and consistent contributions are done to the plan
    • DOL rules require that an employer deposit deferrals to the plan as soon as the employer can; however, in no event can the deposit be later than the 15th business day of the following month. Rules about the 15th business day are not a safe harbor for depositing deferrals; rather, these rules set the maximum deadline for remitting contributions. As an exception, the DOL provides a 7-business-day safe harbor rule for employee contributions to plans with fewer than 100 participants
  • Ensure you know your plan Trustee and what rights they have over the plan’s assets. Under ERISA Section 403(a)there are two types of plan trustees
    • Directed Trustee: holds plan assets but does not control them; they act with direction from a named fiduciary (i.e.-plan sponsor or an investment manager). A directed trustee also has fiduciary responsibility and liability for monitoring the timing of deposits, transactions activity, as well as accuracy and compliance with regulations under the DOL and IRS.
    • Discretionary Trustee: has exclusive authority and discretion to manage and control plan assets. A discretionary trustee has fiduciary responsibility and liability for the selection, monitoring, and replacement of plan assets
  • Understand who your parties-in-interest are to the plan and ensure no inappropriate agreements and/or dealings are undertaken to result in a prohibited transaction
  • Verify the plan’s fidelity bond is up to date on coverage
    • The rule under Section 1112 of ERISA is: a Plan’s fidelity bond should cover at least 10% of the total assets balance, as of the beginning of the plan year, with the bond coverage being no less than $1,000 nor more than $500,000, with certain exceptions for amounts greater than $500,000
  • The plan’s fiduciary insurance coverage meets current needs, for those in a named fiduciary role for the plan, as defined under Section 402(a) of ERISA
  • Verifying all recordkeeping is up to date and maintained
  • Ensuring the plan is not committing prohibited transactions and if such are incurred, they are timely addressed through the DOL Voluntary Correction Program. Your plan’s 3rd service provider (TPA) can assist with these calculations and filings

Any further questions or guidance on best practices for employee benefit plan oversight, please contact our ERISA plans segment leader at lmadajewski@grosscollins.com or 678-306-1222