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Third-party administrator

How to reduce the risks associated with your company’s 401(k) plan

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The regulatory environment for retirment plans is constantly changing to improve the plans offered to Americans. Most small to mid sized comapnies are ill prepared to deal with these changes. Their focus is on running their business, as it should be, rather than running an efficient and effective retirement plan. These companies would offer great plans by outsourcing much of the fiduciary responsibilities to independent fiduciaries(cough, cough).

Is a business protected if it has a third-party adviser (TPA)?Having a third-party adviser does not offer protection. It is up to the individual business to ensure that its TPA is on top of this issue and managing its plan to the new guidelines. In addition, business owners and HR directors can be held personally liable for not complying with plan changes.

What changes are coming into effect in 2012?

One amendment requires a change to the annual limit amount. If your plan adopted the restricted annual limits until 2014 — when annual limits on essential health benefits no longer are permitted — the annual limit amount for the 2012 plan year must be increased to $1.25 million.

In addition, there are changes to claims procedures. Although there have been delays in appeals requirements over the past year, those changes finally will be applicable in 2012. However, they do not apply to grandfathered plans.

The foreign language requirement is also changing. For plan years starting on or after Jan. 1, 2012, plans must start providing explanations of benefits (EOBs) in foreign languages if sent to an address listed in guidance as having a certain threshold of foreign language speakers. This guidance is found in the preamble to the appeals amendment (visit www.dol.gov/ebsa). Plans also must be able to provide claims assistance in these languages if requested.

What else is changing?

Also for plan years starting on or after Jan. 1, 2012, EOBs must contain additional content, including denials codes and additional information to identify claims. Plans also must provide diagnosis and treatment codes and their meanings to claimants upon request.

The new legislation also requires external review. Self-funded plans must be contracted with at least two independent review organizations by Jan. 1, 2012, in order to meet the nonenforcement safe harbor and must contract with three of these organizations by July 1, 2012.

via sbnonline.com

The main message of this article is that plan sponsors are responsible for the compliance of their retirement plan. When plan sponsors rely on their service providers for their plan compliance they may be asking for trouble.. Only an independent analysis will assure compliance and an excellent benefit fore their employees.

Please comment or call to discuss how this affects you and your company.

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The Changing Retirement Plan Landscape for Providers: Prepare or Exit Stage Left

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Business owners must take their head out of the sand and deal with the regulatory changes to their company retirement plans. These issues will not go away and the deadline is fast approaching.

Regulatory Compliance Pyramid
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As bad as I believe it is for plan sponsors, I believe that many retirement plan providers are not prepared for the coming changes in 2012. Many retirement plan providers have been ready for years, but I think there is quite a few that are not and that is a problem on many levels.

Obviously, every retirement plan provider has to be in compliance. It hard to be a third party administrator (TPA) or an ERISA attorney or financial advisor and touting how you can keep your client’s plans in compliance when you are not in compliance. However, I am thinking from a business standpoint.

via therosenbaumlawfirm.com

Is your plan provider ready for the regulatory changes coming in 2012? If you don’t know now is the time to find out.

Please comment or call to find out if your plan will be compliant.

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To Safe Harbor or not Safe Harbor, that is the question

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Plan design is critical to a successful retirement plan. Not all qualified plans are created equal with the amount of alternatives seemingly endless. Each alternative has it’s own benefits and drawbacks.

Safe harbor plan design is one of the best developments in qualified plans in the last 15 years. It’s win win because the 100% vested contributions to plan participants allows the plan to get a free pass on ADP (deferral discrimination tests), ACP (matching contribution tests, if contribution made), and the Top Heavy test (making sure plan doesn’t substantially benefit Key Employees). In addition, if the plan sponsor elects the 3% non-elective safe harbor (3% of compensation contribution to participants, regardless of whether they defer or not), that 3% can also be used to satisfy the minimum gateway contribution to non-highly compensated employees in a cross-tested allocation  (which means that highly compensated employees can get up to 9% of compensation in this type of profit sharingcontribution).That being said, a plan sponsor has to be advised by their third party administration firm (TPA) and/or ERISA attorney why a safe harbor plan design might be a good idea. Here are some clues as to when plans need to go this route:

  1. Plan has failed the ADP, or ACP, or Top Heavy Test (or all of them) in the past 1-2 years.
  2. Plan has come close to failing the above tests in the plan year.
  3. Demographically, plan has non-highly compensated employees that defer at a very low percentage.
  4. Demographically, plan has a large group of highly compensated employees such as a professional practice (law firm, accounting, and medical practice).
  5. Plan already uses a cross-tested, new comparability allocation for their profit sharing contribution.
via therosenbaumlawfirm.com

The safe harbor plan is always worth investigating. It is a win win for the employer wishing to contribute more to their personal account and for the employee needing more savings.

Please comment or call to discuss how the safe harbor plan would benefit your company.

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Plan “Symptoms” that it’s time for a Review

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Plan sponsors must begin taking their 401(k) and all qualified plans more seriously or the government will. This may sound like a threat, however if you could go back and do something to prevent the current health carewould you? Now is your chance with retirement plans.blockquote class=”posterous_long_quote”>So while all plans should be reviewed, there are some plans with more glaring problems than others. These plans may have symptoms that the plan isn’t running correctly and should immediately undergo a plan review.

  1. A plan where the third party administrator is not transparent on fees, especially when it comes to indirect payments they receive, such as revenue sharing payments from mutual funds.
  2. A company that has a profit sharing and money purchase plan that covers the same group of employees.
  3. A plan that has consistently failed their discrimination testing, whether it’s the tests for salary deferrals, top heavy, match or 410(b) participation.
  4. A defined benefit plan which is underfunded.
  5. A defined benefit plan for a company that has increased their workforce.
  6. Any plan with no financial advisor.
  7. A money purchase plan that is covering non-collectively bargained employees.
  8. Any 401(k) plan that has not reviewed their contract with their insurance company provider in the last 5 years.
  9. Any plan without an investment policy statement.
  10. Any plan that has not reviewed their choice of investments in the last year.
  11. Any plan that has not seen their financial advisor in the last year.
  12. Any plan without an ERISA bond and/or fiduciary liability insurance.
  13. A 401(k) plan with low participation or low average account balance per participant.
  14. Any plan that has not been updated in the last 2-3 years
via therosenbaumlawfirm.com

This is a good guideline for plan sponsors to follow. Unfortunately many sponsors will delay or ignore this review until it is too late.

Please comment or call to discuss how a review would help your plan.

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MEPs: The Rumors, The Facts, and Buying in Bulk

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If you are looking to add a qualifed retirement plan for your employees and yourself, multiple employer plans are a great choice. However, choosing the right sponsor is vital.

MEPS have become very popular of late and have certainly become a burgeoning businessfor me. That being said, any burgeoning business will bring in the entry of many new players in the market. The problem for the MEP area, it may bring in a lot of providers that have no background in MEPS or understand how they actually operate.There has been discussion of late of the Department of Labor (DOL) looking at MEPs of late because someone asked someone from the DOL at some benefits conference. The person for the DOL said that they would be taking a closer look at MEPs that are “open”, meaning that the plans are not affiliated through an association like a bar association or some type of civic group. Low and behold, a lot of people started to act as if the MEP sky was falling. You had advisors questioning of having their clients in MEPs and plan providers consider curtailing their interest in them.  Calm yourselves, will you? The sky isn’t about to fall just yet and there is no reason to panic. Having someone from the DOL say something at some Midwest benefits conference is hardly regulation. However, if you read between the lines, I think MEPs that really look like individual plans bundled together for the sole purpose of avoiding separate 5500s. What types of MEPs are these? I think MEPs where you have the third party administrator (TPA) or a registered investment advisor as the plan sponsor.  If the plan sponsor is an association or a company that is unrelated to the TPA, I don’t think you have anything to worry about. If I’m wrong and the DOL is going to act on open MEPs, they would offer some relief to wind them down and allow the participating employers to spin them off.

via therosenbaumlawfirm.com

Multiple Employer Plans are a great alternative for business owners looking to provide a qualified retirement plan for their employees without the work and complexity. An additional benefit is minimized risk to the employer.

Please comment or call to determine how this affects your company.

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