DOL Issues Guidance on Lifetime Income Disclosure for Defined Contribution Plans

If you have a really good memory you might recall that way back at the end of last year Congress actually passed a significant retirement bill called the Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”). We prepared a brief article about the impact the SECURE Act would have on defined contribution accounts that you can find here.

COVID-19 and the employee benefit issues it has created seems to have overshadowed the SECURE Act, but the folks at DOL apparently remembered that they had been given a task. Section 203 of the SECURE Act amended ERISA to require that individual account balance plans add lifetime income disclosure to at least one participant account statement a year and the DOL was given until December 20, 2020, to provide plan sponsors with guidance on how these disclosures should be provided. The DOL has now released this guidance in the form of an interim final rule (IFR) along with a helpful fact sheet.

DOL Issues Guidance on Lifetime Income Disclosure for Defined Contribution Plans

Let’s Assume

The lifetime income disclosure illustrations are meant to provide participants with some idea of what their account balance would provide as a stream of income at retirement. The IFR provides plan sponsors with a set of assumptions and rules that must be used to prepare illustrations and comply with the disclosure requirements. These include:

  • The calculation will use a point-in-time current value of the participant’s account balance and does not assume future earnings.
  • It is assumed the participant would commence the lifetime income stream on the last day of the benefit statement period after the participant has attained age 67 (Normal Social Security Retirement Age for most individuals). If the participant is already over age 67 his/her actual age should be used.
  • The lifetime income illustrations must be provided in the form of a single life annuity based on the participant’s age and as a 100% qualified joint and survivor annuity presuming that the joint annuitant that is the same age as the participant.
  • Monthly payment illustration calculations will project forward using the current 10-year constant maturity Treasury rate (10-year CMT) as of the first business day of the last month of the statement period.
  • Assumed mortality for purposes of the calculation must be based on the gender neutral mortality table in section 417(e)(3)(B) of the Code – the mortality table used to determine lump sum cash-outs for defined benefit plans.
  • Plans that offer in-plan distribution annuities have the option to use the terms of the plan’s insurance contracts in lieu of the IFR assumptions. For clarification purposes, it is important to note that nothing in the lifetime income disclosure rules require that plans offer annuities or lifetime income options.
  • Plans must use model language provided in the IFR to explain the life-time income illustrations to participants.

Sweet Relief

The concept of lifetime income disclosure has been under consideration by Congress and federal regulators for many years and one concern has always been what would happen if the actual results a participant experiences is not as good as these projections. The IFR addresses this concern by providing that if plan sponsors and other fiduciaries follow the IFR’s assumption and use the model language to comply with the lifetime income disclosure rules those fiduciaries will not be liable if monthly payments fall short of the projections.

Something to Keep in Mind

Plan sponsors and participants should keep in mind that the product obtained as a function of complying with these lifetime income disclosure rules is going to yield something quite different than the results that would be achieved through an interactive projection of a participant’s account.  Many retirement plan vendors and financial planners will utilize projection tools that take into account future contributions and earnings as well as attempting to anticipate potential market fluctuations and interest rate changes rather than simply basing a projection on a static period of time. While a participant may find the figures that would be generated by this lifetime income disclosure useful as a year over year comparative tool the participant should also explore other planning tools for a more complete and robust retirement projection.

Timing & Effective Date

This IFR was publicly released on August 18, 2020, and it is expected to be published in the Federal Register very soon. Interested parties have been given 60 days to comment on what the DOL has set forth. The idea is that the DOL will take the comments it receives and make any adjustments it feels are merited to the guidance and then issue final regulations that will supersede the IFR. The guidance in the IFR will be effective one year after publication in the Federal Register. If you have any questions regarding these topics and updates, please contact John Lucas in the form below.

Published September 3, 2020

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Copyright © 2020 by Findley, Inc. All rights reserved.

2020 Defined Contribution Plan Compliance Calendar

Calendar Plan Year & Calendar Employer Tax Year*

defined contribution plan compliance calendar 2020 January through June
defined contribution plan compliance calendar 2020 July through December

January 2020

31   Last day to file Form 945 to report withheld federal income tax from distributions

31   Last day to furnish Form 1099-R to recipients of distributions in 2019

February 2020

14   Last day to furnish fourth quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

28   Last day to file Form 1096 and Form 1099-R on paper with the IRS

March 2020

15   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2019 to avoid 10% excise tax (unless plan is an EACA)

31   Last day to file Form 1099-R electronically with the IRS

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on 2018 plan year excess contributions or excess aggregate contributions where excess amounts not distributed (or forfeited, if forfeitable) by Mar. 15, 2019 (or by June 30, 2019 in case of an EACA)

April 2020

01   Last day to make required minimum distributions (for first distribution calendar year) to applicable plan participants

15   Last day to distribute excess deferrals in excess of 402(g) dollar limits for 2019 to applicable participants

15  Last day for C corporation employer plan sponsors to make contributions and take tax deductions for 2019 without corporate tax return extension

May 2020

15   Last day to furnish first quarter 2020 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

June 2020

30   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2019 to avoid 10% excise tax – in case of an EACA

July 2020

29   Last day to furnish Summary of Material Modifications (SMM) to participants and beneficiaries receiving benefits

31   Last day to file Form 5500 for 2019 without extension

31   Last day to file Form 8955-SSA without extension

31   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

31   (or the day Form 5500 is filed, if earlier) – Last day (without 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on nondeductible contributions, prohibited transactions, certain employee stock ownership plan dispositions, and certain prohibited allocations of qualified securities by an ESOP (if applicable)

August 2020

14   Last day to furnish second quarter 2020 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

30   Last day to furnish annual participant fee disclosures in a participant-directed individual account plan (or up to 14 months from last disclosure notice, if later)

September 2020

15   Last day to pay balance of remaining required contributions for 2019 plan year to satisfy minimum funding requirements for plans subject to minimum funding requirements (such as money purchase pension plans)

30   Last day to furnish Summary Annual Report for 2019 plan year to participants and beneficiaries if an extension to file Form 5500 was not obtained

October 2020

15   Last day to file Form 5500 (with extension)

15   Last day to file Form 8955-SSA (with extension)

15   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

15   (or the day Form 5500 is filed, if earlier) – Last day (with 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

15   Last day to adopt and implement retroactive corrective plan amendment to correct 2019 410(b) coverage or 401(a)(4) nondiscrimination failures

15   Last day for C corporation employer plan sponsors to make contributions and take a tax deduction for 2019 if 6-month automatic extension to file federal income tax return was obtained

November 2020

14   Last day to furnish third quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

December 2020

01   Last day to provide a notice of intent to use safe harbor contribution formula for 2020 plan year to eligible employees

01   Last day to provide an automatic contribution arrangement notice for 2020 plan year to all eligible employees

01   Last day to furnish a qualified default investment alternative (QDIA) notice for 2020 plan year to participants and beneficiaries on whose behalf an investment in a QDIA may be made

15   Last day (with 5500 extension) to furnish Summary Annual Report for 2019 plan year

31   Last day to refund excess contribution (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for the 2019 plan year

31   Last day to make required minimum distributions to applicable participants for distribution calendar years other than for the first distribution calendar year

31   Last day for plan sponsors to adopt discretionary plan amendments that would be effective for the current plan year

*This calendar is designed to provide a general overview of certain key compliance dates and is not meant to indicate all possible compliance dates that may affect your plan.

Copyright © 2020 by Findley, Inc. All rights reserved.

If you would like more specific information about each compliance item, you may review or print the calendar below.

Print 2020 Detailed Defined Contribution Plan Compliance Calendar

Interested in other compliance calendars?

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2019 Defined Contribution Plan Compliance Calendar

Calendar Plan Year & Calendar Employer Tax Year*

January - June 2019 Defined Contribution Plan Calendar Image

January 2019

31   Last day to file Form 945 to report withheld federal income tax from distributions

31   Last day to furnish Form 1099-R to recipients of distributions in 2018

February 2019

14   Last day to furnish fourth quarter 2018 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

28   Last day to file Form 1096 and Form 1099-R on paper with the IRS

March 2019

15   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2018 to avoid 10% excise tax (unless plan is an EACA)

April 2019

01   Last day to make required minimum distributions (for first distribution calendar year) to applicable plan participants

01   Last day to file Form 1099-R electronically with the IRS

01   Last day (unextended deadline) to file Form 5330 and pay excise tax on 2017 plan year excess contributions or excess aggregate contributions where excess amounts not distributed (or forfeited, if forfeitable) by Mar. 15, 2018 (or by June 30, 2018 in case of an EACA)

15   Last day to distribute excess deferrals in excess of 402(g) dollar limits for 2018 to applicable participants

15  Last day for C corporation employer plan sponsors to make contributions and take tax deductions for 2018 without corporate tax return extension

May 2019

15   Last day to furnish first quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

June 2019

30   Last day to refund excess contributions (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for 2018 to avoid 10% excise tax – in case of an EACA

July to December 2019 Compliance Calendar

July 2019

29   Last day to furnish Summary of Material Modifications (SMM) to participants and beneficiaries receiving benefits

31   Last day to file Form 5500 for 2018 without extension

31   Last day to file Form 8955-SSA without extension

31   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

31   (or the day Form 5500 is filed, if earlier) – Last day (without 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

31   Last day (unextended deadline) to file Form 5330 and pay excise tax on nondeductible contributions, prohibited transactions, certain employee stock ownership plan dispositions, and certain prohibited allocations of qualified securities by an ESOP (if applicable)

August 2019

14   Last day to furnish second quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

30   Last day to furnish annual participant fee disclosures in a participant-directed individual account plan (or up to 14 months from last disclosure notice, if later)

September 2019

15   Last day to pay balance of remaining required contributions for 2018 plan year to satisfy minimum funding requirements for plans subject to minimum funding requirements (such as money purchase pension plans)

30   Last day to furnish Summary Annual Report for 2018 plan year to participants and beneficiaries if an extension to file Form 5500 was not obtained

October 2019

15   Last day to file Form 5500 (with extension)

15   Last day to file Form 8955-SSA (with extension)

15   Last day to provide a notice to terminated vested participants describing deferred vested retirement benefits (in conjunction with Form 8955-SSA)

15   (or the day Form 5500 is filed, if earlier) – Last day (with 5500 extension) to furnish annual benefit statement to a participant or beneficiary in an individual account plan that does not provide for participant investment direction

15   Last day to adopt and implement retroactive corrective plan amendment to correct 2018 410(b) coverage or 401(a)(4) nondiscrimination failures

15   Last day for C corporation employer plan sponsors to make contributions and take a tax deduction for 2018 if 6-month automatic extension to file federal income tax return was obtained

November 2019

14   Last day to furnish third quarter 2019 benefit statement to a participant or beneficiary in an individual account plan that permits participant investment direction

December 2019

01   Last day to provide a notice of intent to use safe harbor contribution formula for 2020 plan year to eligible employees

01   Last day to provide an automatic contribution arrangement notice for 2020 plan year to all eligible employees

01   Last day to furnish a qualified default investment alternative (QDIA) notice for 2020 plan year to participants and beneficiaries on whose behalf an investment in a QDIA may be made

15   Last day (with 5500 extension) to furnish Summary Annual Report for 2018 plan year

31   Last day to refund excess contribution (ADP test) and refund or forfeit (if forfeitable) excess aggregate contributions (ACP test) for the 2018 plan year

31   Last day to make required minimum distributions to applicable participants for distribution calendar years other than for the first distribution calendar year

31   Last day for plan sponsors to adopt discretionary plan amendments that would be effective for the current plan year

*This calendar is designed to provide a general overview of certain key compliance dates and is not meant to indicate all possible compliance dates that may affect your plan.

Copyright © 2019 by Findley, Inc. All rights reserved.

If you would like more specific information about each compliance item, you may review or print the calendar below.

Print 2019 Detailed Defined Contribution Plan Compliance Calendar

Interested in other compliance calendars?

Defined Benefit

Health & Welfare

Building Toward a Better Retirement: Choice Architecture and Plan Participants

Overwhelming. That’s normally the first response plan participants give as to why they didn’t start saving for retirement. HR professionals and retirement consultants have heard it before, “Too many options; too many decisions; I wasn’t sure what these words even meant.” Effectively helping plan participants prepare for retirement takes designing the message in a different way.

Choice architecture is a term used to describe how decisions can be influenced by the layout, order, and variety of the choices presented. This concept can be used to help steer retirement plan participants into better decision-making. Plan sponsors can use choice architecture to their advantage by improving how participants’ choices are presented and by using smart default options.

An important first step is to consider what obstacles often prevent employees from joining a plan or increasing their savings. A white paper from Wells Fargo, Driving Plan Health says, “Knowing which plan features, communications, and digital tools are designed to address these various psychological barriers is an important first step and can help guide the selection of which features and tools to use.”[1] The plans that have solved for these types of problems, leveraging design elements, usually produce the best retirement outcomes for their employees.

Make their first choice automatic

Automatic enrollment and annual re-enrollment can be used to overcome inertia of participants by automatically putting them into the plan when they first become eligible. The participants must take action to opt out if they do not want to participate; this often results in much higher 401(k) participation rates than plans which don’t use automatic enrollment.

Retirement outcomes for participants can be further improved by implementing automatic deferral increases. This helps those participants who do not take initiative in managing their savings.

Finally, qualified default investment alternatives (QDIA) can be tailored to meet the needs and investment styles of different workforces. Offering QDIAs allows participants to accumulate far greater savings in the form of investment earnings than if they left their funds in cash or a stable return fund. In the article, Choice Architecture and Participant Investment Decisions, Vanguard notes, “Sponsors seeking to change behaviors of longer-tenured participants may wish to consider reenrollment into a low-cost default option, as that is one way to counteract the profound inertia influencing longer-tenured participants’ investment holdings.”[2]

Incentivize their saving goals

Once enrolled, there are many choices participants must make. How those choices are presented to them can make a huge difference in long-term savings. For example, the Save More Tomorrow program gives participants a nudge to save more by having them establish their own future defaults today. The defaults selected happen automatically in the future when a raise occurs, so the participant never has a decrease in take-home pay.[3]

Another common way to incentivize participants to save more is to offer employer matching or profit sharing contributions that are tied to their 401(k) deferral rates—the more they defer, the more the employer gives them.

There are always some participants who select their investments when they first enroll and never touch them again. Auto-rebalancing can be used to return the accounts to their intended asset allocation, often increasing returns and keeping risk in check.

Smart design leads to smart decisions

An article by Voya suggests using a Reflective Index to help apply choice architecture to the plan. It is possible to automate the determination of a participant’s decision-making style. The Reflection Index evaluates participants on three decision-making style indicators: attention, information gathering, and making tradeoffs. The assessment gives insight into how participants in different plans are making decisions. Voya states, “By leveraging the insights of behavioral science and the data of the digital world, we can tailor our suggested ‘course corrections’.”[4] Plan sponsors can use the index to help them make plan design decisions. For instance, plans where more participants are characterized by a reflective decision-making process should encourage their participants to re-evaluate their elections based on additional personalized information; whereas re-enrollment might be a better solution for plans if most participants are characterized by an instinctive decision-making process. “By making it easier for their participants to make the right decision, we can offer them another chance at a successful retirement.”[5]

Something we may not think of as affecting a participant’s retirement plan choices is the website design. Participants’ interactions on websites can be tracked; then small changes can be made to lead participants to better choices. Simple changes to implement might include locating relevant plan information where the participant is being prompted to make a choice, making the language of enrollment options as simple as possible, or using a “traffic light” color design to guide choices.

One size doesn’t fit all when it comes to participant communication. Tailor the plan’s communications to have language and information designed for your workforce. This will help grab the participant’s interest and improve the communication’s overall effectiveness.

Saving to and through retirement

Choice architecture can be used not only to optimize auto features but also to help eliminate the loss of funds. Retirement Clearinghouse has recently developed a program which helps participants keep track of their retirement funds as they move from job to job. For smaller account balances, which might otherwise get cashed out or rolled to an IRA by default, this program captures and tracks these assets by moving terminated participants’ account balances with them to their new employer’s plan—all by default.[6]

Another way savings can be preserved is by limiting opportunities to withdraw from the plan through loans, hardship withdrawals, in-service or termination cash outs.

Finally, choice architecture can even influence the age at which a participant might begin to draw down their savings. Using a “consider the future first” checklist of eight reasons to claim benefits later, The TIAA Institute encourages some participants to delay claiming their benefits for up to 18 months.[7]

In perspective

Whether a participant logs in once and makes a single choice or is making a lifetime of choices, there are many ways employers can use choice architecture to assist all types of decision-makers when they do engage. Understanding your employees and tailoring the approach can help them make the best decision–ultimately improving retirement readiness.

Questions? Contact the Findley consultant you normally work with or Laura Hohwald at Laura.Howald@findley.com or 615.665.5349.


[1] “2018 Driving Plan Health.” Wells Fargo, 2018. Accessed January 2019.

[2] Pagliaro, Cynthia, and Stephen Utkus. “Choice Architecture and Participant Investment Decisions.” The Vanguard Group, May 2018. Accessed January 2019. www.oecd.org/els/health-systems/Obesity-Update-2017.pdf.

[3] Thaler, Richard, and Shlomo Benartzi. “Save More Tomorrow™: Using Behavioral Economics to Increase Employee Saving.” American Journal of Education, Feb. 2004. Accessed January 2019. www.journals.uchicago.edu/doi/abs/10.1086/380085?journalCode=jp.

[4] Benartzi, Shlomo. “Using Decision Styles to Improve Financial Outcomes.” Voya. 2019. Accessed January 2019. www.voya.com/behavioralfinance.  

[5] Ibid.

[6] “Moving Retirement Forward.” Retirement Clearinghouse. January 2019. Accessed January 2019. https://rch1.com/.

[7] Johnson, Eric, Kirstin Appelt, Melissa Knoll, and Jon Westfall. “Preference Checklists: Selective and Effective Choice Architecture for Retirement Decisions.” TIAA Institute. June 2016. Accessed January 2019. https://www.tiaainstitute.org/sites/default/files/presentations/2017-02/ti_selective_effective_choice_architecture_for_retirement_decisions.pdf.

Posted on March 13, 2019

© 2019 Findley. All Rights Reserved.

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When a Retirement Plan has the Beneficiary Blues

If you’ve administered a retirement plan for any length of time, then you’ve probably “sung the blues” at some point when it comes to distributions to beneficiaries. Whether it’s the hassle of incomplete beneficiary designation forms; the mathematical mystery of a split among beneficiaries that equals 110%; the puzzle created when a primary beneficiary is allocated 50% of the benefit and the “contingent beneficiary” is apparently allocated the other 50%; or the dilemma, in the face of no form, when a daughter submits the deceased participant’s last will and testament as evidence of her mother’s intent, you know the pain of the beneficiary blues.

How to avoid the blues

Check the plan for beneficiary provisions. The first thing you should do is review your plan and ensure it has a default beneficiary provision. It should state something along the lines of “in the event that a participant fails to name a beneficiary or the named beneficiary, or any successive or contingent beneficiary, predeceases the participant, or the designation is invalid for any reason, then the benefit will be distributed in the following order of priority to . . .” Alternatively, the plan may reference the order of priority provided in the intestate law for the state of the deceased participant’s residency. In either case, you will have a ready answer when you discover too late that no beneficiary has been validly designated to receive a deceased participant’s benefits. If you are unable to find such language, take the appropriate action to have your plan amended to add a default beneficiary provision.

In addition to the default beneficiary provision, there are other helpful provisions when it comes to determining the appropriate beneficiary in a complicated situation. A plan may provide that a properly completed beneficiary designation form submitted to the administrator revokes all prior designations, and that, except for specified events, a divorce decree automatically revokes a participant’s prior designation of a now former spouse as beneficiary.

Review beneficiary designation forms carefully and immediately upon submission. Reviewing beneficiary designation forms when they are first submitted will not avoid the issue created when a sole beneficiary passes away prior to the participant, but it will avoid the above mentioned 110% and 50% problems. In those cases, the administrator admitted that they thought a quick glance for beneficiary names and social security numbers, as well as the participant signature, was all that was needed. Before accepting a designation form from a participant’s lawful agent, keep in mind that a power of attorney must specifically authorize an agent to designate a beneficiary. A simple reference to your retirement plans, or retirement benefits in general, is not enough. As in many aspects of plan administration, creating a checklist of required review steps will prove helpful to you.

Know your options when you’ve got the blues

Get all the information you need for your determination. Where it is unclear on the face of all the plan documentation who the proper beneficiary is, you have to make a preliminary determination. You must decide whether you possess, or can obtain, enough information to make the beneficiary determination yourself, or if you need to ask a court to issue a declaratory judgment as to the proper beneficiary. You may consider numerous circumstances in processing your determination. You can take into account whether there is employer information outside of plan records, such as a life insurance beneficiary form, that provides you with confidence that your interpretation of a fuzzy beneficiary designation form is appropriate. You may also want to consider whether the relative size of the benefit means that imposing your interpretation of an unclear form is a low risk proposition and the costs of obtaining a declaratory judgment are disproportionately high, or vice versa.

Remember you’re wearing your fiduciary hat. Keep in mind that directing the distribution of retirement plan benefits is a fiduciary act. You must weigh carefully all of the circumstances surrounding the assessment of a beneficiary designation form, and appropriately process your determination. You may want to consult with your trusted advisors or even obtain an opinion from legal counsel.

Questions? Contact the Findley consultant you normally work with, or Sheila Ninneman at Sheila.Ninneman@findley.com, 216.875.1927.

Posted on March 12, 2019

© 2019 Findley. All Rights Reserved.

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Scared vs. Prepared: Conducting an Operational Compliance Review

Well, it arrived.  On your desk is a white envelope with a return address to the Federal Government. Are you prepared for this day?  Are your procedures up-to-date? 

Fortune Favors the Prepared

No one likes finding out that they are being audited by the Internal Revenue Service (IRS) or Department of Labor (DOL). But the fact of the matter is that all qualified retirement plans (defined benefit and defined contribution) may be audited. Prudent plan sponsors are proactive, have up-to-date procedures and guidelines, and periodically conduct an operational compliance review, or self-audit. Taking the initiative to do a self-review can help you avoid added costs and liabilities down the road.

Plan sponsors have a fiduciary responsibility to ensure their plans are operating according to the law and governing plan documents. This includes everything from documentation, to benefit calculations, to the day-to-day administrative processes. No matter what type of retirement plan you have, or whether it is administered in-house or outsourced to a professional recordkeeper, you should consider conducting an operational compliance review every few years.

Bonus: It’s also the perfect time for plan sponsors to locate and organize all plan documents, Summary Plan Descriptions, administrative manuals, third-party service agreements, and meeting minutes.

A particularly good time to conduct a review is when a merger or acquisition takes place. If you are considering merging one plan into another, it is beneficial to correct errors in each plan before merging. Once the plans are merged, it is harder to isolate when and where the problem started and to calculate any corrections needed.

Start to finish, a self-audit can last from six weeks to six months depending on the size of the plan, depth of review, and findings. The review may be broad, focusing primarily on plan documents, annual filings, and compliance testing. It may be very detailed, structured to encompass everything from internal payroll processes down to spot checking select records or transactions from the recordkeeping system.

How Do We Make Sure We’re Prepared?

When considering an operational compliance plan review, it’s tempting to think, “Nothing has changed with our plan, so we’re good.” However, just because your plan hasn’t changed in your eyes doesn’t mean you shouldn’t review. New tax laws, legislative updates, and organizational restructure all affect retirement plans. Use these eight questions to help you pinpoint areas that may need to be addressed in your review:

  • How long ago was the last internal review completed?
  • Are there any recent laws or regulation changes affecting your plan, your company, and your employees?
  • Does your plan document reflect the way the plan is currently being administered?
  • When was the last time your benefits and payroll teams reviewed the wage types to confirm that they align with the plan document?
  • Is there a committee that meets to discuss and make decisions regarding the retirement plan?
  • Are the retirement plan committee decisions documented in meeting minutes?
  • Have there been tax laws or internal company changes which may impact the plan’s operation?
  • Has your company made any acquisitions or changes in payroll systems?

Where Is the Most Exposure?

The DOL and IRS periodically publish lists of the most common compliance issues they find when reviewing retirement plans. The most common issues include:

  • Definition of compensation
  • Updates to the plan documents for tax law changes
  • Employee eligibility
  • Loans
  • In-service distributions
  • Minimum required distributions
  • Nondiscrimination testing
  • Vesting
  • Timing of payroll deposits
  • IRC 410(b) coverage testing
  • Qualified domestic relations orders
  • Target date funds
  • Revenue Sharing and 12b-1 fees
  • Plan committee meetings
  • Blackout participant notices

This list is not exhaustive; however, it is a good reference and cheat sheet for areas of focus for your plan review. Most recently, the DOL has been focused on the diligence of plan sponsors in locating missing participants.

In Perspective

The day that letter arrives doesn’t have to be scary.  Performing an operational compliance plan review every few years can keep your plan up-to-date and compliant. Questions? If you would like to learn more about conducting an operational compliance review of your plan, please contact the Findley consultant you normally work with, or contact Amy Kennedy at amy.kennedy@findley.com, 419.327.4102, or Beth Mattimoe at beth.mattimoe@findley.com , 419.327-4416.

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Posted March 6, 2019