Failure to follow 401(k) plan regulations can be costly

Internal process for plan administration is critical.
By David Stofer, Principal, Sageview Advisory Group

A recent decision by a U.S. District Court in Missouri* regarding fiduciary responsibilities for 401(k) plan administration can serve as a warning to others.  The warning? Understand your obligations, establish a process and be diligent in your execution.

The court found the company violated five areas of fiduciary responsibility:

1. Failure to monitor record keeping costs.
2. Failure to negotiate rebates for the Plan from investment companies chosen to be on its platform.
3. Selecting more expensive share classes when less expensive share classes were available.
4. Removing one fund and replacing it with another fund in violation of the Investment Policy Statement.
5. Agreeing to pay the record keeper for the two 401(k) plans an amount that exceeded the market costs for plan services in order to subsidize non-plan corporate services (including payroll and record keeping for the health and welfare and the defined benefit plans.)

Because of the subjective nature of many fiduciary decisions, process is a paramount consideration. In exercising its decision, the Court faulted the company for its lack of process - failing to follow established plan documents, not implementing a full and prudent review of fees and expenses and ignoring issues that should have reasonably been scrutinized.

What steps can you take to reduce your risk of violating the many regulations that exist in regards to 401(k) plan management?

• Work with your financial and/or benefits advisor to make sure you understand the extent of your responsibilities;
• Establish procedures and processes that ensure compliance;
• Consider outsourcing plan management and/or providing other investment options to your employees. New options exist that you may not be familiar with. 

Providing attractive investment options to employees is an important benefit to attract and retain top-notch workers. Knowing your options and being knowledgeable of your fiduciary responsibilities in administering these benefits is fundamental to your success.

*Tussey vs. ABB, Inc.

Supreme Court Ruling Requires Action

Take one issue at a time and stay on track.

By David Wetzler, President and Benefits Consultant

In a 5-4 decision authored by Chief Justice Roberts, the Supreme Court upheld the Affordable Care Act (ACA).  While there are many fine points to the ruling that are still being reviewed, the June 28 ruling makes it clear that the individual mandate is constitutional.

Here are a few things you need to understand about how this impacts many businesses right now.

1. The Medical Loss Ratio rebates will be forthcoming, and many companies will see some kind of financial reimbursement from their carriers.   It will be your responsibility to determine what to do with these funds, keeping in mind compliance guidelines related to your specific situation.
2. The Summary of Benefits and Coverage (SBC) mandate will take effect starting with renewals beginning after September 23, 2012.  
3. The new regulations for reporting aggregate cost of health coverage for the 2012 reporting year on W-2s will take effect in January of 2013.  Employers should begin preparing for this now. 
4. You will need to amend flexible medical spending account plans to comply with the $2,500 cap, applicable for plan years beginning on or after January 1, 2013;
5. Prepare to begin the additional Medicare tax withholding for certain high income earners which is effective in 2013; and
6. For employers with 50 or more full-time employees, you must begin to look down the road to 2014; with an eye on what impact the shared responsibility tax may have on your business and employee population.
7. Health plans must include the the expanded list of no-cost sharing services for Women’s Preventive Health Care.
8. For those businesses with self-insured plans, a Comparative Effectiveness Research Fee as outlined in the Internal Revenue Code (section 4376) will be required.

SRA Benefits has anticipated this moment for many months and is ready to advise companies on what needs to be done in each of these areas to keep ensure compliance.  Contact us today for further information: info@srabenefits.com.