Hot Topics in Employer-Sponsored Retirement Plans

As an employer, how often do you think about your company’s retirement plan and whether everything is being done correctly in operating the plan?

The Department of Labor (DOL) has not decreased its focus on these plans, and continues to give us insights into what it considers “hot buttons” and “red flags”.

Late remittance of employee deferrals and loan payments continue to be a hot button, and likely always will be.  Keep in mind that the rule is “as soon as administratively feasible”. Your plan should have a repeatable process that is consistently performed with each payroll.

The DOL has long been interested in the quality of audits performed on retirement plans provided by employers. For large plans (generally more than 100 participants), an annual audit is required. The audit report gets submitted along with the informational return (Form 5500).

The DOL conducted an audit quality study on these plans and found a direct correlation between the error rates and the number of employee benefit plans audited by a particular firm.  As a result, the fewer audits performed (less experience) the more errors detected. Why should you care? If the audit is found to be insufficient, the PLAN SPONSOR gets hit with penalties for not fulfilling the duty to have a quality audit performed. The DOL is continuing to focus on firms that “dabble” in these types of audits, so as a plan sponsor you might ask your auditor how many employee benefit plan audits they perform in a typical year.

Cyber security is another hot topic for the DOL. The concern is for all the participant data that exists in online portals with employers as well as third-party-administrators and other vendors. Plan sponsors should evaluate their cyber security governance as a part of their risk assessment including service providers and their vendors. This might include written security policies and encryption guidelines, periodic audits to detect threats, periodic testing of backup and recovery plans as well as training to reinforce data security and employee education/awareness. Cyber security insurance may also be part of the mix.

Another hot topic that has received significant press recently is the new fiduciary regulation package issued in April by the DOL. The new rules are largely aimed at those who provide investment advice to retirement plans. The regulations prescribe additional guidelines to ensure that a plan participant is given advice that is in the participant’s “best interest”. Lawsuits have already been filed challenging the new regulations, so expect to hear more about this in the media in the coming months.

Most of all, what the DOL really wants to see from plan sponsors is a commitment to their fiduciary responsibility involved in operating an employee retirement plan. Many tools are available to assist plan sponsors to help them follow best practices, and hiring experts is not only allowed but encouraged, as long as you continue to MONITOR those experts. Having a retirement plan committee is highly encouraged, and documenting processes involved in administering your plan is key.

For further information, or to discuss best practices in this area, please contact us at 402.496.8800