5 steps to a successful year-end retirement plan checkup

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With the year-end shortly around the corner, advisers and their plan sponsor clients have a number of tasks to complete or consider to keep their retirement plans in compliance with ERISA.

While plan administration is an ongoing process, it is useful to take the specific tasks with year-end deadlines as a way of undergoing a self-assessment of plan procedures and administrative efficiency.

Advisers and plan sponsors should consider the following:

1) Investment policy statement review. Check that the assumptions and criteria set forth in the plan’s investment policy statement (IPS) are still applicable to the plan’s goals and objectives. The IPS should be reviewed at least on an annual basis, and now is a good opportunity to make any necessary changes. Plan investments should also be reviewed for adherence to the IPS. Any that do not meet the requirements should be documented and discussed with the plan’s committee. All findings and methodologies should be documented, and if changes are elected, participant notice of the changes and updated expenses should be sent with at least 30 days’ lead time.

2) Review internal controls. Does the sponsor make contributions on a timely basis? Do contributions match the elections made by participants? Do loans and distributions meet the rules of the plan? Participants should receive proper notification of their eligibility to enter the plan. Plan operations as a whole should be analyzed for any gaps in compliance. As year-end approaches, advisers and plan sponsors could benefit from a self-assessment of the plan’s administration. Reflect on any discovered issues and set in motion processes to correct them in the future.

3) Plan document update. As applicable, the plan document should be updated to adhere to applicable laws and regulations, if necessary. Plan operational changes can be implemented here as well. Remember that plan amendments require timely notification to participants and any updates should be reflected in an updated summary plan description.

4) Testing prep. As advisers and their plan sponsor clients perform their unofficial self-audit, they can also begin to prep for non-discrimination testing. Plan sponsors should ensure that they are counting and tracking all employees, including terminated, and that their compensation, ownership and classification records are up to date. Consultants can set their clients up for more efficient testing by helping them to understand the nuances that go into the census, as well as any pitfalls they may encounter.

5) Participant notices. Remember that some participant notices are due by year end. These include, as applicable: Safe harbor, qualified default investment alternative and automatic enrollment notices. While not necessarily due at year-end, sponsors often include the annual ERISA 404a-5 participant fee disclosure due every 12 months with these notices.

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Clearly, retirement plan maintenance and administration is an on-going process which includes more tasks than those listed in this article. However, besides the required deadlines for ERISA compliance, advisers and plan sponsors should take these steps to evaluate plan efficiency and goals. Any inadequacies can be addressed now, with an eye for future improvement.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does adviser assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

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