9 - Plan Sponsor Administrative Functions

Question 1

Although the scope and function of employee benefits administration differs within various organizations, certain core activities are inherent in benefits management generally. The following activities generally must occur:

(a) Benefits plan ____
(b) Benefits plan ____
(c) Benefits policy _____
(d) _________
(e) Applying _______
(f) ______ management and resource controls
(g) ______ reporting
(h) Legal and regulatory _______
(i) Monitoring the external ________.

Answer 1

• design
• delivery
• formulation
• Communications
• technology
• Cost
• Management
• compliance
• environment

Question 2

Plan complexity makes __________ employee benefits a challenge for plan sponsors.

Answer 2

communicating

Question 3

There are dual standards to meet in benefits communications—the maximum standards being those the company sets for creating a proper _______ and use of the plans, and a minimum standard specified by the Employee Retirement Income Security Act (ERISA) for meeting the legal compliance requirements for ______ to plan participants and beneficiaries.

Answer 3

understanding

disclosure

Question 4

Explain the parallels between the tax law provisions within the Internal Revenue Code (IRC) and the labor law provisions within ERISA. They are virtually ______

Answer 4

identical

Question 5

the two key labor law areas that have no corresponding sections within IRC:

Answer 5

(1) reporting and disclosure
(2) fiduciary responsibilities.

Question 6

A major aspect of Title I concerns the disclosure of information—to participants and their beneficiaries and to the government. These requirements generally apply to most ________ plans regardless of the number of participants involved. There are, however, a limited number of exemptions. They do not, for example, apply to unfunded ________ plans, which are maintained to provide employees with benefits they would otherwise have received but that were not provided under the qualified plan because of Section 415 limitations

Answer 6

tax-qualified

excess benefit

Question 7

Briefly describe the following disclosure documents required under Title I of ERISA:

• (a) ___________: is the booklet, folder or binder that describes the plan and is given to employees.
• (b) __________: Is a summary of any plan amendment or change in information that is required to be included in the SPD after the initial SPD has been issued.
• (c) ________: Is a summary of the plan’s annual financial report.
• (d) ________: A personalized statement that must be provided to a participant either upon request, or at specific intervals for various types of retirement plans.

Answer 7

• Summary plan description (SPD)
• Summary of material modification (SMM)
• Summary annual report (SAR)
• Benefits statements

Question 8

PPA modified filing requirements in connection with the plan’s annual financial report (filed using Form 5500) to make this information more accessible and readily available to parties interested in this information. PPA requires that certain annual report information be filed in an _______ format for Internet display by DOL. DOL must post the information to the Internet website within ____ days of the filing. This information must also be displayed on any employee ________ website maintained by the plan sponsor.

Answer 8

electronic

90

intranet

Question 9

Historically a plan sponsor was required to supply a benefit statement to a participant or beneficiary upon request, although the employer was not required to provide more than one statement in every 12-month period. PPA modified the requirements for benefit statements, expanding the need for issuance beyond the need to fulfill a plan member’s request in any 12-month period beginning after December 31, ______. Under PPA rules:

• (a) If a participant in a defined contribution plan is entitled to direct plan investments, he or she must receive a benefit statement once per ______.
• (b) If a participant in a defined contribution plan is not entitled to direct plan investments, he or she must receive a benefit statement once per _____.
• (c) For an active, vested participant in a defined benefit plan, the plan sponsor must provide either
  
  • (1) a benefit statement once every _____ years or
  • (2) an _________ describing the availability of a benefit statement and the manner in which the participant can obtain a benefit statement.

Answer 9

• 2006
• quarter
• year
• three
• annual notice

Question 10

In addition to benefit statements, there are other items that must be given to employees upon request and/or made available for examination at the principal office of the plan administrator and at other locations convenient for participants. These items include:

• (a) Supporting plan ______
• (b) The complete application made to IRS for determination of the plan’s ______ status
• (c) A complete copy of the plan’s ________
• (d) A plan termination report (IRS Form _____) should the plan be terminated.

Answer 10

• documents
• tax-qualified
• annual financial report
• 5310

Question 11

The SPD must be given to new employees within ___ days after they become participants and to beneficiaries within 90 days after they start ________.

For new plans, the initial SPD must be given to participants within ___ days after establishment of the plan. New, complete SPDs must be filed and distributed at least every ___ years. If there have been material changes since the last SPD was issued, however, the employer must file and distribute a new SPD every ___ years. The SPD must be in permanent form and must be current regarding all aspects of the plan and the information required by Title I of ERISA.

Answer 11

• 90
• receiving benefits
• 120
• ten
• five

Question 12

All of the information in the SPD must be “written in a manner calculated to be understood by the ______________” and should be “sufficiently accurate and ________” to inform employees and beneficiaries of their rights and obligations under the plan.

If a plan covers ____ or more people who are literate only in a language other than English, or if 10% or more of the participants working at a “distinct physical place of business” are literate only in a non-English language (25% or more where the plan covers fewer than 100 participants), the SPD must include a prominent notice in the familiar language offering assistance—which may be oral—in understanding the plan.

Answer 12

average plan participant

comprehensive

500

Question 13

The annual report is designed to require a complete disclosure of all _______ information relevant to the operation of the plan. Thus, for example, it includes items such as a statement of assets and liabilities presented by category and valued at current market prices; changes in assets and liabilities during the year; and a statement of receipts and disbursements.

Certain financial statements in the report have to be certified by an independent qualified public accountant. Insurance companies and banks are required, within ____ days after the end of the plan year, to furnish any information necessary for the plan administrator to complete the annual report.

Plans that are ______ are granted limited exemptions. These plans do not have to complete the financial information sections of the form, nor need they engage an accountant for audit or include an accountant’s opinion. Plans with fewer than ____ participants have less complex filing requirements for their Form 5500.

Answer 13

financial

120

fully insured

100

Question 14

__________ include the text of the actual plan itself and any collective bargaining agree- ment, trust agreement, contract, or other document under which the plan is established or operated.

Plan participants and beneficiaries are entitled to receive copies within ___ days of making a written request. _____ may request copies of these documents at any time.

Answer 14

Plan documents

30

DOL

Question 15

Describe the changes made by PPA in terms of the content requirements for the personal benefits statement for retirement plans:

Traditionally, plan participants and beneficiaries could request in writing a statement of their own benefits, but not more often than once in any ___-month period.

Additionally, PPA added a number of substantive requirements for the content of personal benefit statements. If a participant can direct plan investments, the benefit statement must provide the following:

• (a) Information explaining any ________ on the right to direct investments
• (b) An explanation on the importance of ________ investments
• (c) A statement cautioning participants on the risk of holding more than ____% of a portfolio in the securities of any single entity, such as employer securities.

For a defined benefit plan, the benefit statement must include:

• (a) An explanation of any permitted ______ under Section 401(l) or of a ________ arrangement.

Answer 15

12

restrictions

diversifying

20%

disparity / floor-offset

Question 16

Anyone denied a claim under any plan is entitled to a ______ giving the reasons for the denial, usually within ___ days. This explanation should be a clear, comprehensible statement of the specific reasons for the denial of the claim.

The explanation also must include a description of any material or information necessary for the claimant to improve the claim and the reasons this additional material is needed. Also in the explanation there should be a full description of the plan’s ______ procedure. The claimant must be given at least ____ days thereafter in which to appeal the claim and is entitled to a final decision in writing within ___ days of the appeal (120 days in special circumstances).

Answer 16

written statement

90

appeal

60

60

Question 17

What must a plan sponsor do to fulfill its obligations relative to joint and survivor notifications?:

Under defined benefit pension plans and some defined contribution plans, each participant must be informed, individually and in writing, of the right to elect or reject both pre- and postretirement survivor benefits.

Timing for notification as to postretirement survivor benefits is ____ months before the earliest retirement date under the plan. Notification for pre-retirement survivor benefits must be provided between the first day of the plan year in which the participant becomes age ____ and the end of the plan year in which he or she becomes age ___.

If an employee is over the age of 32 when hired, notification must be provided within ____ years after that employee becomes a plan participant. If a vested participant terminates employment before the age of 32, notice must be provided within year after the _____ date.

Answer 17

• nine
• 32
• 35
• three
• termination

Question 18

When a distribution from a qualified plan is eligible to be rolled over into an IRA or another employer’s qualified plan, the plan administrator, within a reasonable period of time before making the distribution, must send a ______ notification to the participant or beneficiary explaining the rollover and direct transfer rules, the tax-withholding requirements on distributions that are not directly transferred and how _____ can be reduced or deferred

Answer 18

rollover

taxes

Question 19

ERISA provides for a number of penalties for violation of the disclosure requirements. Among the penalties are the following:

• (a) If a plan administrator does not fill a participant’s or beneficiary’s request for information to which he or she is entitled under the plan within 30 days, the plan administrator may be personally liable to the individual who made the request, for a fine of up to $____ per day.
• (b) Willful violation of any of the reporting and disclosure provisions may incur a criminal penalty of up to a $______ fine and/or one year in prison for an individual, and up to a $____ fine for a corporation.
• (c) _______ may be brought against the plan administrator by participants or beneficiaries to obtain information to which they are entitled under their plan, to enforce their rights under the plan or to clarify their rights to future benefits under the plan.
• (d) Civil action also may be brought by the secretary of labor, a participant, a beneficiary or another fiduciary against an individual who breaches his or her _____ duty.

It is expected that __________ will be performed continually and that a team of investigators will follow up on all discrepancies found and all complaints filed by plan participants or beneficiaries. Records now are required to be kept for a period of ____ years after the documents are due for filing, even for those plans that are exempt from filing.

Answer 19

• $110
• $5,000
• $100,000
• Civil actions
• fiduciary

random audits

six

Question 20

Previously, safe harbors were only provided when issuing SPDs, SMMs and SARs. The final regulations issued in April ____ expanded the scope of safe harbors to all ERISA Title I disclosures. Such items as pension plan investment information, material on pension plan loans, responses to written requests from plan participants and beneficiaries, and notices relating to qualified domestic relations orders may now be conveyed in electronic form. Compliance with the regulation meets ERISA’s general requirement that disclosure be “reasonably calculated to ensure actual receipt.”

Answer 20

2002

Question 21

Electronic delivery may be used if the employee has access to the employer’s computer system where the employee is reasonably expected to perform his or her duties.

Additionally, all of the following conditions must be met:

• (a) The administrator must take appropriate and necessary measures to ensure that the system for furnishing the document results in actual ______ by participants of the transmitted information and documents.
• (b) Each participant must be provided with _______, through electronic means or in writing, apprising the participant of the document to be furnished electronically, the significance of the document and the participant’s right to request and receive a paper copy of the document.
• (c) On request, the plan administrator must provide the document in _____ form to a participant.
• (d) The electronically furnished version of the document must be the same in all material respects as the paper version.
• (e) The electronically furnished document must satisfy all other requirements with respect to the substance and presentation required to be in the paper version of such a document.
• (f) When a disclosure includes personal information relating to an individual’s accounts or benefits, the plan administrator must take reasonable and appropriate steps to safeguard the ________ of the information.

Answer 21

receipt

notice

paper

confidentiality

Question 22

IRS has stated in Notice 99-1 that where the Code or regulations do not specify how a particular transaction is to be conducted (e.g., in writing), then a plan may perform the transaction electronically without jeopardizing the plan’s qualified status under the Code. The enumerated actions include the following:

• (a) ______ participants in a plan
• (b) Designating employee ______ rates
• (c) Designating ______ (except where spousal consent is required)
• (d) Designating _______ allocation of future contributions and currently held assets
• (e) Receiving and responding to participant ______ requests
• (f) Electing direct ______.

Answer 22

• Enrolling
• contribution
• beneficiaries
• investment
• information
• rollovers

Question 23

According to IRS, functions may be performed through the use of electronic media if the following conditions are satisfied:

• (a) The electronic media must be reasonably _______ to the participant.
• (b) The electronic form of the notice must be as ________ as the paper version.
• (c) The participant must be advised that he or she has the right to request and receive the notice or consent forms in paper version at no charge.
• (d) The system must be reasonably designed to preclude someone other than the appropriate party from giving consent (e.g., by using _______).
• (e) The system must give the participant a reasonable opportunity to review, modify or rescind his or her ______ before an election becomes effective.
• (f) The participant must be given ________ of his or her consent and the terms thereof either through paper or electronic media.

Answer 23

• accessible
• understandable
• passwords
• consent
• confirmation