Key Concepts in Plan Compliance Management

The surest way to maintain Plan compliance is to engage an experienced and knowledgeable third-party administrator, and to consider these points:

    It is false economy to cut this corner.

• Centralize responsibility

    Work may be divided, but final responsibility should reside in one place.

• Authorize communications

    Make sure that your advisors and appropriate personnel exchange information.

• Ask for an explanation

    Have your administrative service provider explain what they do and when.

• Do not forget your Fiduciary responsibilities

    Ask your administrative service provider how to limit liability and document your actions.

It is false economy to cut this corner. Employee benefit plans represent a complicated interplay between tax law, labor law, accounting, human resource management, and business strategy. Penalties for simple compliance failures can be extraordinarily large. These burdens are appropriately put in the hands of persons with experience and expertise.

• Centralize responsibility

Work may be divided, but final responsibility should reside in one place. We have encountered far too many situations where penalties or plan qualification issues arose because several advisers each thought that the others were handling the matter in question. Good attorneys, good accountants, good investment counsel, and good employees, but none had considered the particular issues to be their job. Make it the responsibility of your third-party administrator to coordinate plan administration.

• Authorize communications

Make sure that your advisors and appropriate personnel exchange information. Confidentiality is important to all of us, and professionals are appropriately reluctant to share information without authorization. When it comes to your benefit programs, it will ordinarily be to your advantage to direct your advisers to consult with each other as needed.

• Ask for an explanation

Have your administrative service provider explain what they do and when. Professional plan administrators are accustomed to providing explanations of their services and of the rules that apply to employee benefit plans. They are also familiar with the compliance requirements that face your plans. Having them explain their undertaking will assist you in working with them, will help you understand your responsibilities in the process, and will reduce the potential for misunderstandings.

• Do not forget your Fiduciary responsibilities

Ask your administrative service provider how to limit liability and document your actions. Plan administrative services are frequently separated from investment services (for good reason). Your professional plan administrator can, however, help you to ensure that your approach to investment responsibilities is adequate, and that it affords you the greatest available measure of protection from liability. You can also obtain some guidance from them regarding the types of record-keeping that will help document your attention to your fiduciary responsibilities.