Module 3 Plan Documentation Requirements

Question 1

What is the Windsor effect?

Answer 1

extended federal tax and benefit rights to couples in a same-sex marriage

Question 2

What is the impact of the Windsor effect on plan documents?

Answer 2

plan sponsors should review their plan documents to ensure that the plan language is current and compliant

Question 3

What are the 5 main ERISA reporting and disclosure requirements?

Answer 3

1) a written plan document
2) a summary plan description
3) a summary of material modification
4) an annual financial report (form 5500)
5) a summary annual report

Question 4

What is a written plan document?

Answer 4

• describes the benefits provided under the plan
• names the individuals responsible for the operation of the plan
• outlines the arrangements for funding and amending the plan

Question 5

What is the purpose of a written plan document?

Answer 5

to set forth the rules and requirements governing the plan

Question 6

What are the 8 elements that should be included in a plan document?

Answer 6

1) name(s) of the plan fiduciary
2) policies and procedures relating to plan administration
3) funding requirements
4) a description of how benefit payments will be made
5) claims and appeals procedures
6) plan amendment and termination authority and procedures
7) method for distribution of plan assets upon plan termination
8) a statement that plan assets can be used to pay reasonable costs of plan administration

Question 7

How does the IRS treat same sex spouses like a spouse?

Answer 7

1) as a named beneficiary
2) entitled to survivor annuities
3) minimum distribution and rollover rules apply
4) withdrawals, loans, and hardship distributions apply
5) alternative payee rights for distributions under a QDRO apply
6) family attribution and other ownership rules applicable to retirement plans apply

Question 8

What is an SPD?

Answer 8

includes details about eligibility, benefits, plan operations, funding and claims procedures, statement of ERISA rights

Question 9

When must an initial SPD be given to participants?

Answer 9

within 120 days of the date the plan becomes subject to ERISA

Question 10

When must a changed SPD be given to participants?

Answer 10

every 5 years by the 210th day following the close of the relevant plan year to which the SPD applies

Question 11

When must an unchanged SPD be given to participants?

Answer 11

every 10 years by the 210th day following the close of the relevant plan year to which the SPD applies

Question 12

When should new participants receive an SPD?

Answer 12

within 90 days of becoming participants in the plan

Question 13

What documents should be in place for retirement plans?

Answer 13

1) SPD
2) Investment committee charter
3) Investment policy statement (IPS)

Question 14

Describe the SPD for a retirement plan

Answer 14

• outlines the key features of the retirement plan
• basic plan provisions
• outlines ER contribution and vesting information, eligibility, plan loans and withdrawals, distributions, and contact info

Question 15

Describe the investment committee charter

Answer 15

1) specifies activities for which the committee is responsible
2) define the governing bodies
3) define how the committee members are selected or appointed
4) establish how often regular committee meetings should occur
5) define the roles of any outside consultants

Question 16

Describe the investment policy statement (IPS)

Answer 16

1) define the plan and its purpose
2) describe responsibilities for those involved with the program
3) establish the investment menu structure
4) assign investment performance benchmarks and develop performance measurement standards and processes
5) determine criteria for selecting and terminating investment managers
6) document the investment decision-making process

Question 17

Components that should be included in an investment policy statement (IPS)

Answer 17

1) statement of purpose
2) statement of roles and responsibilities
3) asset allocation
4) investment goals and objectives
5) investment guidelines
6) investment performance review and evaluation

Question 18

How many people should comprise an investment committee?

Answer 18

five to seven (odd number)

Question 19

Who should be in an investment committee?

Answer 19

• a representative of senior management (CFO or COO)
• legal counsel
• HR
• Finance

Question 20

Components of an investment committee

Answer 20

• elect a chairperson
• elect a secretary
• participation is voluntary
• establish terms of service

Question 21

Three types of committee education

Answer 21

1) understanding fiduciary responsibility
2) education about functioning as a committee
3) investment education

Question 22

How often should an investment committee meet?

Answer 22

at a minimum, annually, but generally quarterly or semi-annually

Question 23

Topics that should be covered in investment committee meetings

Answer 23

1) follow up on discussion from previous committee meetings
2) review of investment performance and options
3) review of legislative and regulatory updates
4) review of vendor services and fees
5) review of the investment policy statement (IPS)
6) discussion of any plan improvements

Question 24

How often should a recordkeeper request for proposal be issued for a retirement plan?

Answer 24

every three to five years

Question 25

What is a less demanding alternative to an RFP for investment committee members?

Answer 25

a request for information (RFI) is less demanding while still comparing costs and services with other providers

Question 26

How has the purpose of employee benefit plan communication changed recently?

Answer 26

• Employers must change their communication objectives to focus on motivating employees to make decisions about how to best utilize their benefits in a way that is economical to both the plan sponsor and the employees’ families
• must attract and retain a diverse workforce
• affect’s the organization’s bottom line
• needs to be tied to overall business strategies

Question 27

What factors influence the shape and scope of an organization’s benefit communication?

Answer 27

1) highlight the value of employee benefits
2) create involvement and ownership with employees
3) encourage better utilization of benefits
4) support and facilitate benefits administration
5) satisfy legal requirements

Question 28

What is a total compensation statement?

Answer 28

the cost of the benefits is computed and added with pay to reveal the employee’s actual total compensation

Question 29

What are the differences between a market-driven approach to employee benefit communications and the traditional approach to employee benefit communications?

Answer 29

MARKET DRIVEN APPROACH - objectives are specific, the focus is on affecting or changing attitudes or behaviors, measurable, messages are targeted to specific audiences, direct
TRADITIONAL APPROACH - general objectives, focus is on informing or explaining the benefits, difficult to measure, sent to a single mass audience, neutral tone

Question 30

How do you move to a market-driven approach?

Answer 30

1) research the audience
2) set goals based on the anticipated results of a communication
3) plan the messages and media so that they are targeted to the appropriate market segments in the audience
4) implement the communication campaign based on the research step
5) test and measure the results of the communication

Question 31

What are the reasons the IRS has for urging plan sponsors to establish a strong internal control environment?

Answer 31

1) can eliminate or reduce errors in the operation of the plan
2) they can help a plan sponsor quickly identify errors and initiate their own corrections
3) help keep an audit of the plan focused which reduces time spent
4) can shorten the turnaround time on any requests for additional information
5) promote clear communication between examiners and representatives of the plan

Question 32

What do DOL and IRS expect auditors to do regarding internal controls?

Answer 32

they have made it clear to auditors that they expect them to take a close look at internal controls as part of their routine audit procedures

Question 33

Who is responsible for establishing and maintaining an effective system of internal controls over employee benefit plans?

Answer 33

the plan sponsor and plan administrator

Question 34

Controls generally fall into which specific areas?

Answer 34

1) plan documentation and amendments
2) plan testing and administration
3) at third party administrators
4) controls for multiple plans, subsidiaries or business units, or merging plans
5) defined benefit pension plans

Question 35

What problem is commonly encountered by auditors in employee benefit plan audits with the allocation of funds to employee accounts?

Answer 35

the funds are not always remitted timely to the employee benefit plan

Question 36

What areas have been identified as needing internal controls?

Answer 36

1) distributions and loans
2) hardship withdrawals
3) nondiscrimination testing
4) contributions
5) compensation and personal data

Question 37

What is a SOC 1 report?

Answer 37

• Report on Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting
• prepared by an auditor engaged by the third-party administrator to review and assess controls at that service organization

Question 38

How has IRS helped organizations with their internal control obligations?

Answer 38

• provides checklists to help companies keep their plans in compliance
• tools on its website that can be helpful to companies reviewing their controls or establishing controls in a more formal way