M3: Flashcards
Provides retirement income to employees, or results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan, or the method of distributing benefits from the plan.
Pension benefit plan
Distribution period of SPD for plans with no material changes
Every 10 years
- Objectives are specific
- focus is on affecting or changing attitudes or behavior
- successes directly measurable
- messages are targeted to specific audience segments
- communication tone is direct
Market-Driven Approach
a. Highlight benefit value
b. Create involvement and ownership
c. Encourage better utilization of benefits
d. Support and facilitate benefits administration
e. Satisfy legal requirements
Key elements of benefit communication in today’s standards
Document that calculates and reveals the total of employee’s
pay
Total Compensation Statement
Time frame for distribution of SPD for new plan participants
90 Days
Through the purchase of insurance or otherwise, medical, surgical, or hospital care benefits or benefits in the event of sickness, accident, death, or unemployment, vacation benefits, apprenticeship or other training programs, daycare centers, scholarship funds, and prepaid legal services
Welfare benefit plans
An audit control report from a third party administrator
Soc 1
The foundation for how the retirement plan investment program is expected to operate
Investment Policy Statement (IPS)
The time frame for distribution of SPD/SMM by the close of the relevant plan year
210th Day
Extension of benefit rights to couples in same-sex marriage
Windsor Effect
Any plan, fund, or program…established or maintained by an employer, an employee organization, or both.
ERISA definition of a plan
These three plan documents together will outline the key features, philosophy, processes, and procedures of the retirement plan.
- Summary plan description (SPD)
- Investment committee charter
- Investment policy statement (IPS)
In place to find problems that preventative controls did not successfully prevent
Detective controls
- Objectives are general
- focus is on informing or explaining
- success is often hard to measure
- messages are sent to a single mass audience
- Communication tone is neutral
Traditional Approach
An important component of plan governance
Investment Committee Charter
Somewhat less demanding that an RFP, but still compares costs and services with other providers
Request for Information (RFI)
o Name of the plan fiduciaries
o policies and procedures relating to the plan administration
o funding requirements
o a description of how benefit payments will be made
o claims and appeals procedures
o plan amendment and termination authority and procedures
o method for distribution of plan assets upon termination
o a statement that plan assets can be used to pay reasonable costs of plan administration
ERISA plan doc requirements
Distribution of SPDs for plans that become subject to ERISA
120 Days
Outlines the key provisions of a plan
SPD
A written plan document
ERISA plan requirement
Best way to eliminate/reduce errors in benefit plan operations
Good internal controls
A document that must be written in a clear, easily understood language
SPD
Used to detect potential errors before they occur
Preventative controls
Government plans sponsored by a federal, state, or local government and certain church plans sponsored primarily for church employees
Plans exempt from ERISA
Retirement plan RFPs should be issued at a minimum of
Every 3 to 5 years
- Control environment
- Risk assessment
- Control activities
- Information and communication
- Monitoring
5 components of effective internal controls
Any systematic measure that a company or other organization establishes to assure its business is conducted in an orderly manner, to safeguard its assets, to deter wrongdoing, to ensure accuracy and completeness of information, and to produce reliable and timely information.
Internal Controls
Written plan document
SPD
SMM
Annual financial report (form 5500)
SAR
ERISA documentation requirements
The time frame that SMM’s must be distributed within
60 days of adopting the change (90 if done every 90 days regardless)
The communication tone in market driven approach
Direct
Typical number of members on investment committee
5-7 members meet objectives
Distribution period of SPD for plans with material reductions and
changes
Every 5 years
(a) Specify activities for which the committee is responsible, such as coordinating vendor analysis and recommending plan design features
(b) Define the governing bodies with whom the committee must consult and to whom they need to provide recommendations
(c) Define how committee members are selected or appointed
(d) Establish how often regular committee meetings should occur
(e) Define the roles of any outside consultants.
Responsibilities of the Investment Committee Charter
