Why it's Important to Review, Refresh and Revise Retirement Plan Documents

  • Bjork Group

Headline Image - Why its Important to Review Refresh and Revise Retirement Plan Documents

You likely recognize the importance of seeing your doctor for an annual physical to keep your health in tip-top shape, or taking your car in for routine maintenance to keep it running like new.

But what about checking the health of your retirement plan? When is the last time you reviewed your retirement committee charter, investment policy statement (IPS) and other key retirement plan documents to monitor your plan’s compliance with specific standards of conduct and fiduciary responsibilities under the law?

Ideally, you should meet with your plan’s advisor at least once a year to evaluate the overall health of your retirement plan, which includes reviewing plan documents and operations to help ensure they are up to date with current guidance and regulations.

 

Always a Fiduciary: An Ongoing Responsibility

As a retirement plan fiduciary, adhering to plan documents is one of your most important roles. As a plan sponsor, you are a fiduciary to the plan. This means you have an ongoing and continuous responsibility to monitor the plan, service providers, investment offerings and operations. It’s your job to ensure they are being managed in the sole interest of your participants and their beneficiaries, and for the exclusive purpose of providing benefits and paying plan expenses.[1] Not following these standards of conduct could subject you to personal liabilities. In addition, courts could take action against plan fiduciaries who breach their responsibilities. There has already been a plethora of lawsuits against plan fiduciaries in recent years.

Associate Supreme Court Justice, Stephen J. Breyer, famously submitted his verdict of the landmark Tibble v. Edison case, which set a precedent for fiduciary breach cases regarding the monitoring and selection of retirement plan investments. He stated that “… a trustee has a continuing duty — separate and apart from the duty to exercise prudence in selecting investments at the outset — to monitor, and remove imprudent, trust investments.” In short, monitoring and managing your retirement plan, its investments and operations are not responsibilities to be taken lightly.

 

Compliance Never Sleeps

Moreover, government and regulatory agencies such as the Department of Labor are continually monitoring plan fiduciaries to make sure they are following plan documents and procedures in accordance with the Employee Retirement Income Security Act (ERISA), the law that governs employer-sponsored retirement plans. Ultimately, this puts the onus of compliance and proper plan management on you. That said, it can be helpful to partner with your plan advisor to perform annual plan reviews for any common mistakes while managing your retirement plan and investments.

Addressing six common mistakes:

  1. Poor investment oversight. Create an investment committee, led by a qualified financial professional and conduct periodic investment reviews and ongoing monitoring towards ensuring the plan’s investment options and fees are appropriate for all participants.

  1. Failure to conduct periodic plan reviews. Regulations are constantly evolving and changing. Conducting a periodic plan review or benchmarking process, preferably with an independent third party, can help ensure that plan fees are reasonable and the plan is promoting positive outcomes for participants.

  1. Failure to take timely action. Having knowledge of potential compliance, investment, plan fees or other significant issues, but failing to remedy them in a timely manner, can result in serious penalties or personal liability for plan fiduciaries.

  1. Lack of an up-to-date Investment Policy Statement (IPS). Typically maintained by the retirement plan investment committee with help from the plan advisor, the IPS guidelines address how the plan’s investment options are selected, monitored and managed. The IPS should be periodically reviewed and updated to reflect the plan’s current goals. Many employers create an IPS but fail to follow or update it, putting them at risk for a breach of fiduciary duty.

  1. Lack of a proactive participant education and communication plan. Three markers of retirement plan success are widespread participation, high savings rates and adequate investment diversification. An effective participant education and communication program can help increase deferrals and promote proper asset allocation for participants. It can also make a significant difference in your plan’s success.

  1. Not following the terms of the plan document. It’s important to make sure employees are being enrolled as they become eligible, participants are receiving the correct employer matching contributions, and loans and distributions are being handled according to the policies and procedures in the plan documents.

If you identify operational or compliance errors during your annual review — don’t panic. The Internal Revenue Service (IRS) and Department of Labor (DOL) have programs to assist you in fixing mistakes. Your plan’s advisor and third-party administrator (TPA) can help with operational and compliance errors, too.

Keep in mind that once you’ve identified and corrected any plan errors, you should put processes in place to avoid future mistakes. In addition to conducting annual reviews, you should also perform regular maintenance to ensure your plan remains in good health — just like sticking to a healthy diet and exercise regimen prevent illness and performing routine tune-ups on your car keep it performing at its best.

 

 

Sean C. Bjork, CIMA®, AIF®

Vice President

Bjork Group

1033 Skokie Boulevard, Suite 210

Northbrook, IL. 60062

p.312.464.7082

seanbjork@bjorkgroup.com

www.bjorkgroup.com

 

Employee benefit consulting offered through The Bjork Group, Inc. Securities and Retirement Plan Consulting Program advisory services provided by Bjork Asset Management, Inc. offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. Other advisory services offered through Independent Financial Partners (IFP), a registered investment advisor. IFP, Bjork Asset Management, Inc. and The Bjork Group, Inc. are separate entities from LPL Financial.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.

 

[1] U.S. Department of Labor. Fiduciary Responsibilities.

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Guide to Missing Participants: End of the Year Clean Up

  • Bjork Group

Headline Image - Missing Participants End of the Year Clean Up

As a plan fiduciary, you are responsible for your keeping track of former employees with account balances, a.k.a. missing participants. The DOL and IRS are paying more attention to plan sponsors’ efforts to identify and locate these participants, especially when uncashed checks and approaching RMDs are involved.

If you have missing participants, the first step in locating them is to get your plan in order. By cleaning up your plan, you will be able to identify the participants and then take the necessary steps to locate them.

This easy-to-use checklist can help you take control of former employees and your missing participant problem.

Download the Guide

 

Sean C. Bjork, CIMA®, AIF®

Vice President

Bjork Group

1033 Skokie Boulevard, Suite 210

Northbrook, IL. 60062

p.312.464.7082

seanbjork@bjorkgroup.com

www.bjorkgroup.com

 

Employee benefit consulting offered through The Bjork Group, Inc. Securities and Retirement Plan Consulting Program advisory services provided by Bjork Asset Management, Inc. offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. Other advisory services offered through Independent Financial Partners (IFP), a registered investment advisor. IFP, Bjork Asset Management, Inc. and The Bjork Group, Inc. are separate entities from LPL Financial.

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Tracking Down Your Missing Participants

  • Bjork Group

Headline Image - Tracking Down Your Missing Participants

If you have terminated participants with balances in your 401(k) plan, some of whom you can’t locate, you’re not alone; missing participants are an industry-wide problem.

What is a missing participant? A missing participant is a former employee who has left funds in a qualified retirement plan (ex. 401(k) plan) at their former employer but has failed to keep their contact information current and is no longer actively managing their plan account.            

A 2018 survey by Boston Research Technologies and the Retirement Clearinghouse estimates that 11% of terminated employees have stale addresses in their plans and one of five relocations result in a missing plan participant; their research also suggested an excess of three million missing participants.[1]

 

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Video – 3 Fiduciary Action Items During Turbulent Times

  • Bjork Group

Headline Image - 3 Fiduciary Actions During Turbulent Times

COVID-19 has brought many updates, changes, and challenges, and we know the stress this can place on a plan sponsor.

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4 Qualified Plan Tax Advantages for Employers

  • Bjork Group

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By choosing to offer your employees a 401(k) plan, you’re sending a powerful message — that you’re invested in their future and committed to helping them work towards financial security in their retirement.

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Plan Sponsor Guide - 401(k) Matching Formulas that could Boost Participation without Breaking the Budget

  • Bjork Group

Headline Image - 401(k) Matching Formulas that could Boost Participation without Breaking the Budget

Offering a retirement plan shows your employees that you are committed to helping them save for their future. A matching formula is a great way to give a little bit more to your employees and increase contributions!

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Pros and Cons of Taking Coronavirus-Related Distributions from Retirement Savings

  • Bjork Group

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The COVID-19 pandemic has undoubtedly shaken our economy to the core. Many businesses have struggled to keep their doors open which has caused unemployment claims to soar. Record unemployment, coupled with a U.S. society that has an average household savings account of about $8,800[1], has many people looking to their retirement savings as a “piggy bank” for necessary funds to keep their heads above water.

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American's Drowning in Debt: What Employers Can do to Help

  • Bjork Group

Headline Image - Americas Drowning in Debt

How can you help your employees that are drowning in debt, save more today?

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5 Steps to Create a Financial Wellness Program

  • Bjork Group

Headline Image - 5 Steps to Create a Financial Wellness Program

In today’s economy, Americans are worried about their finances, and it spills over into every aspect of their lives, even their work.

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How a Financial Wellness Program Can Improve Company Culture

  • Bjork Group

Headline Image - How a Financial Wellness Program Can Improve Company Culture

Employers recognize that financial stress is taking a toll on their workforce — and their bottom line. Financial wellness can help improve employees’ fiscal well-being and reduce stress by providing the education and tools they need to help them

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