0. FAQs

Question 1

Why are EB plans so vulnerable to cyberattacks and ID theft?

Answer 1

Because of the massive amount of personal and identifiable info involved in the administration of the BPs. Electronic health records are particularly valuable to cyber criminals and are often not properly protected.

Question 2

What are the 4 common types of cyber threats, and which is costliest to recover from?

Answer 2

1. Ransom ware
2. Phishing
3. Wire transfer or email fraud
4. Malware via external devices

Ransomware is the most costly because criminals encrypt & seize entire drives and will only release the data for a high ransom - $100ks+ - before the data is recovered.

Question 3

Why is it so important to have the best possible due diligence process in place when choosing service providers for plan fiduciaries?

Answer 3

It provides fiduciaries with a defensible record if there is a data breach and the providers’ practices are challenged.

Question 4

What is the difference between an IPS and an SPD for a retirement plan?

Answer 4

The SPD outlines the features of the retirement plan and fulfills the legal reqs of the plan.

The IPS is the foundation for how a retirement plan investment program is expected to operate.

Question 5

What is the value of a SOC-1 report?

Answer 5

The report is prepared by an auditor assessing the controls in place at the outside service organization. This is an efficient method to show that the controls are in place and operating effectively.

Question 6

What is the main difference between a market-driven approach and the trad’l approach in BP comms? Why is it important to have a market-driven approach over the trad’l?

Answer 6

Unlike the trad’l approach, which is general in nature, the market-driven approach has specific objectives of the comm strategy. Additionally the market-driven approach focuses on changing and affecting attitudes and behaviors rather than explaining the benefits.

Question 7

What determines whether ER contributions towards health ins are free from FICA FUTA tax?

Answer 7

To be free from FICA FUTA, ER contribs must be made under a plan. One of the following reqs must be met to prove the plan exists:
- The plan is referred-to in an employment contract
- The ER can document that EEs contribute to the plan
- The plan is in writing and copies are made available to EEs
- The ER is required to make contribs
- The plan must benefit EEs and their deps for the tax exclusion to apply

Question 8

When are ESOPs not taxable wages, and not subject to FIT FICA FUTA?

Answer 8

These plans are not taxable and not subject to FIT FICA FUTA unless they exceed 100% of the EE’s annual comp or the annual inflation-adjusted limit, whichever is less.

Question 9

Is all GTL taxed?

Answer 9

No, only the imputed cost of coverage in excess of $50k is included in one’s income, using the IRS premium table. It’s also subject to FICA (Medicare & SS).

Question 10

Under what circumstances would a STD plan be considered a WBP subject to ERISA?

Answer 10

If a disability plan provides more than the EE’s normal comp, or if it is funded in any manner (such as with insurance), then the program is a WBP and is subject to ERISA.

Question 11

If a new SPD is distributed, when does the new 5- or 10y time period begin?

Answer 11

A new SPD must be distributed every 5 years if there’s been a material change in that time. Otherwise, 10y.

Whether 5 or 10y have elapsed since the last distribution, once there’s been another distribution, the time begins to run again.

Question 12

How long must welfare plan records be maintained for ERISA purposes?

Answer 12

At least 6 years from the date the plan’s 5500 form is filed.

There’s a recommendation to maintain for 8 years after the end of the PY.

Question 13

Why is the Management Comments Letter so important in audit proceedings?

Answer 13

Because it discusses plan management and provides info for the individuals in charge of the plan’s ops. This comm from the auditor provides info on deficiencies and identifies significant weaknesses.

Question 14

Why is a deficiency related to ERISA section 408b2 so impactful?

Answer 14

Identified deficiency related to ERISA Ss 408b2 relates to a lack of proper monitoring of service provider fees and disclosures. This is important bc a plan service provider is considered a party in interest. If there are no properly written disclosure docs, any amounts received by the service provider are considered unreasonable and the related statutory exemption doesn’t apply. In turn, this results in prohibited transactions.

Question 15

Why do plan fiduciaries consider financial statement fraud the more concerning of the two primary types of fraud?

Answer 15

A plan’s financial statements can be compromised, which can lead to deceiving plan participants. The participants’ accounts may not be correct. They depend on financial statements to make accurate financial decisions.

Question 16

Why was the Supreme Court decision in Tibble v. Edison so impactful to the retirement world?

Answer 16

The USSC decision removed any barriers that blocked plan participants from filing a lawsuit relating to an improperly monitored plan investment. The court ruled that failure to properly monitor an investment fund would still be exposed to claims for 6y from the date of a monitoring failure.

In Tibble, the USSC found that fiduciaries of plans governed by ERISA have a continuing duty to monitor the prudence of plan investments.

Question 17

Who does the DoL consider responsible for accurately maintaining required plan records?

Answer 17

The plan admin.

Not the service provider! The plan admin maintains the plan docs, compliance docs, EE comms, and payroll records.

Question 18

What effect did the Pension Protection Act of 2006 have on money market funds being the default option for DC funds?

Answer 18

Prior to the PPA Act of 2006, MM funds were the default option for DC plans. These were lower risk funds, but not seen as an effective way to grow assets for the long term.

After the PPA of 06, Target Date Funds became the most popular deferred comp option. These funds have greater risk & seek higher returns (with a shift over time).

Question 19

Why do companies choose self-funded health insurance plans over fully-insured plans?

Answer 19

For the opportunity to lower healthcare costs and to be able to have more flexibility in plan design.

Question 20

What are the differences between types of plan audits?

Answer 20

Transitional audit: ensures a plan has been set up appropriately when moving from one carrier to another

Operational audit: Looks at procedures associated with enrollment, e.g. card processing, customer standards

Reinsurance audit: Discovers charges that should have been paid by the reinsurance carrier, but weren’t

Question 21

What is the diff bt predictive modeling & data analytics?

Answer 21

Predictive modeling is a statistical technique used for forecasting purposes, such as future outcomes.

Data analytics uses a process to inspect, clean, transform, and model data to discover trends that can aid in benefit plan decisions.

Question 22

How is the prudent man theory relevant to investing strategies?

Answer 22

The prudent person rule gives discretion to a fiduciary or especially a trustee to manage another person’s affairs and invest their money with the skill and care one would use with their own investments.

Question 23

What is the difference between a closed-end fund and an open end fund?

Answer 23

Closed-end funds typically do not redeem their shares. Investors sell shares on the market to other investors. These funds are often more expensive, and tend to be actively managed.

Question 24

What is the benefit of purchasing a Qualified Longevity Annuity Contract (QLAC) for older workers?

Answer 24

QLACs offer an opportunity for people to start investing at an older age.

A QLAC is an investment vehicle that guarantees that the funds in a qualified retirement plan (401k, 403b, IRA) can be turned into lifetime income without violating required minimum distribution rules.

Question 25

How do you know if severance payments paid over a specific period of time are considered to be subject to ERISA regulation?

Answer 25

In the case Delaye v Agripac, the 9th circuit stated that although the executive’s severance pmts were to be disbursed over 2 years, it did not require an ongoing administrative scheme; therefore, these payments aren’t subject to ERISA regulation.

Question 26

Does ERISA regulate oral severance agreements?

Answer 26

ERISA requires that EBPs be prepared as a written document. If an ER has not complied with preparing a written document, it can still be considered an ERISA plan, as supported by several court cases.

Question 27

What is the purpose of ERISA Ss. 502(c)(1)?

Answer 27

To induce plan admins to comply with the ERISA statutory disclosure mandate
To punish admins for noncompliance with this mandate.

not to compensate participants/bens for any injuries.

Question 28

How is a person’s SS retirement amount calculated?

Answer 28

It is based on a worker’s primary insurance amount (PIA), a monthly amount paid to a retired worker @ full ret age, or to a disabled worker. The PIA is based on a worker’s average indexed monthly earning, AIME. This method updates the worker’s past earnings, based on increases in the average wage.

Question 29

What is the difference between social adequacy and individual equity?

Answer 29

Social adequacy: benefits provide at least a minimum “floor of protection” for workers/worker’s families getting benefits for dependents.

Individual equity: a worker’s benefit amount is related to their earnings.

Question 30

What must one do to meet the criteria for being “disability insured”?

Answer 30

Meet 2 work tests: recent and duration work tests.

The number of credits that are required to meet the recent work test depends on a person’s age, and when one becomes disabled.

The duration of work test doesn’t have to occur within a certain period of time.