Managing an organization’s retirement plan is no easy task. The rules are complicated and the penalties can be severe. Far too often, however, upper management doesn’t understand this dynamic and designates a person that is not technically-equipped to handle this serious responsibility.
Employers often hire a myriad of advisors to help them administer their plan, but these advisors do just that – help. As the plan administrator, the employer is responsible for the plan unless they pay a hefty fee to offload that responsibility, which makes it so surprising that many employers give this responsibility to the wrong person in their organization.
Some of the most important aspects of plan management are:
- An understanding of the plan document and making sure the provisions are being properly applied. The document outlines eligibility for benefits, how benefits will be determined, when benefits will be paid and many additional details about the plan’s operation. Plan provisions must also accurately be explained to plan participants when questions arise.
- Making sure that employee contributions are deposited timely. The IRS expects funds to be remitted as soon as administratively feasible. Any delay in the remittance of these funds will require an earnings contribution and excise tax penalty.
- A basic understanding of the regulatory requirements surrounding the plan’s operation as set forth by the DOL and IRS. Plan management is riddled with various limits and deadlines. A basic and increasing level of understanding is critical because it protects the business and the plan’s fiduciaries.
- Establishment of various internal controls. It is not sufficient to know what needs to be done. There need to be controls in place to ensure that what is being done is correct. Some examples include: reconciliation of funds withheld from payroll and submitted to the custodian, review of vesting data elements before processing distributions, review of employees’ census information before becoming eligible for plan participation.
For large plans that require an annual audit, a strong plan manager is even more critical. A plan that is run properly has fewer issues during audit and is filed with the DOL on time. Employers with plans that are managed by staff that are not up to the task have a miserable time during their plan audit that can lead to lots of frustration across many levels of management.
Running a company’s retirement plan seems like it should be a simple enough task. There are multiple outside advisors involved with the plan, but the ultimate success depends on who’s in charge at the company. Assigning the task to a lower-level, inexperienced employee is a recipe for disaster that we see played out time after time.
If you should have any questions related to who should be managing your plan, feel free to contact or Mark Flanagan of Aronson’s Benefit Plan Services Practice at 301.231.6200.
About the Author: Mark Flanagan is a director in Aronson’s Specialty Tax Group. He has over 20 years of experience in the compliance and technical aspects of qualified and non-qualified benefit plans, including plan design, consulting, and technical administration.