Module 6 Issues in Vendor Management - Retirement Flashcards
What was the essence, or gravamen, of the plaintiffs’ complaint in Tibble v. Edison?
defendants (plan sponsors) had breached their duty of prudence by offering six higher priced mutual funds when virtually identical lower priced mutual funds were available at exactly the same time
What was the result of the Supreme Court Tibble decision?
the decision removed the impediment that blocked plan participants from filing a lawsuit relating to an improperly monitored plan investment where the initial decision to add that investment occurred beyond the ERISA six-year statue of limitations
What are the steps a plan fiduciary should take to ensure that their approach to monitoring plan investments meets the Tibble standards of being ‘systematic’ and ‘regular?’
requires adopting procedures for the periodic monitoring of plan investments, closely adhering to those procedures, and then documenting the implementation of those procedures
What is the hallmark of a prudent, systematic monitoring process for plan investments?
is to have a written ‘to do’ list of items that need to be accomplished each time plan fiduciaries meet to evaluate their plan’s investments
What are the actions that fiduciaries should take each time they meet for the purpose of monitoring the performance of the plan’s investments?
1) review the quarterly report prepared by the investment advisor to evaluate the performance of investment funds over relevant time periods
2) review whether institutional share classes are available for the plan’s investment funds
3) evaluate the investment funds to determine if they represent all the desired asset classes and if there has been “style drift” since the funds were last evaluated
4) review recent changes in the law with ERISA counsel, including court cases and government pronouncements
5) if applicable, plan committees should take care to evaluate their target-date funds on a quarterly basis
6) review all fees that are directly or indirectly paid by the plan, and make sure the fees are reasonable
What has been the effect on the recordkeeper marketplace of employers looking for more or better services at lower costs from these providers?
plan sponsors facing regulatory pressures and participant lawsuits have been demanding more or better services from recordkeepers at lower costs
What are the differences between the core services provided by TPAs and those provided by plan advisors?
the core services provided by TPAs are plan documents and amendments, compliance testing, forms 5500 preparation and processing of loans and distributions, the advisor’s role can include investment selection and monitoring to conducting the plan reviews to engaging in provider negotiation and benchmarking to providing education
In what areas of plan management are plan advisors likely to possess a different kind, not just degree, of information from TPAs?
plan advisors are particularly knowledgeable about mutual funds, collective investment trusts, different share classes, active versus passive investments, to versus through TDF glide paths, and net asset value versus accumulation unit value, social security optimization, nonqualified deferred compensation arrangements, distribution planning, and estate and trust issues
What common goal to plan advisors and TPAs share?
is to design a plan that meets the objectives of the plan sponsor yet falls with the framework allowed by Internal Revenue Service (IRS) and Department of Labor (DOL) rules
In developing an outline to serve as a guide to the various parties establishing and subsequently administering a qualified retirement plan, what are the key areas of responsibilities and related functions within these areas?
1) plan design and implementation
a) determine company objectives
b) decide on plan provisions
c) prepare plan and trust documents, summary plan description and adopting resolution
d) obtain proposals/provider search
e) select service providers
f) provide employee enrollment and education
2) Fiduciary responsibilties with plan investments
a) meet with plan committee and fiduciaries at least annually
b) create and maintain investment policy statement (IPS)
c) select investments to be offered
d) monitor investments; add, delete, or replace investments as directed by the IPS
e) benchmark plan fees and services
f) counsel terminating or retiring employees
3) IRS and DOL compliance
a) prepare year-end compliance testing:
- coverage, 401(k) nondiscrimination tests
- top heavy, vesting
b) prepare form 5500 and applicable schedules
c) distribute summary annual report and other required participant notices
4) operational compliance
a) notify employees of eligibility
b) ensure that contributions are deposited timely
c) ensure that plan operates according to its terms
While the plan sponsor is ultimately responsible for ensuring that all plan transactions are executed in a timely fashion, who typically carries out the responsibilities and functions?
the plan sponsor is responsible for developing company objectives and making decisions regarding plan provisions
the plan administrator is responsible for selecting service providers, filing IRS and DOL forms, and distributing summary annual reports and other required participant notices and operational compliance
the record keeper/provider takes on the task of enrolling participants and also compiling information to disseminate required participant disclosures, prepare plan documents, and conduct year end testing
the broker/advisor/consultant assist with soliciting plan proposals, conducting a provider search, assisting with employee enrollment, surveying the investmenet industry for plan fees and other services and counseling employees
What kinds of records can DOL commonly request from the plan administrator?
specific plan information and specific employee information
What financial reports that a plan filing form 5500 is required to keep for a minimum of six years after the filing date?
1) statements from the trust, custodian, brokerage accounts and or bank accounts that reflect deposits, withdrawals, income, fees, and other transactions
2) documentation that such accounts are properly maintained as plan accounts
3) certified audits and/or appraisals, depending on plan size and type of assets held
4) distribution records including withholding and forms 1099-R
5) reconciliation of deposits to deductions taken on coporate income tax returens
What documents outside of financial reports must a plan filing form 5500 are required to keep for a minimum of six years after the filing date?
1) proof of the fidelity bond covering the plan
2) data supporting all required nondiscrimination testing
a) highly compensated employee and key employee determinations
b) controlled group and affiliated service group determinations
c) payroll and hours information for all employee used to determine eligibility, exclusions and allocations
What records are needed to document the benefits due and/or paid to employees under section 209 of ERISA?
1) basic plan information
a) properly executed plan documents, amendments and/or restatements
b) timing and details of statutory/regulatory changes operationally implemented prior to being memorialized
c) participant communications
2) employee/participant information
a) personal details
b) employment history
c) compensation and hours history
d) officer and ownership history and familial relations
e) details of employee exclusions
f) election forms for choices of deferral amount and investments
g) transactional history of contributions and distributions
