Whether we’re talking fashion or music or architecture or barber shops, it seems things that have faded from existence eventually come back around. See if this cycle looks familiar: cutting edge becomes status quo becomes so last week becomes so [insert decade] becomes retro becomes vintage.
Topic Archive: Defined Contribution
If you’ve spent any time working with retirement plans, you know how complicated they can be. It seems like every rule has an exception and an exception to that exception. It is no wonder that accidents occasionally happen despite everyone’s best efforts to follow the rules.
Back in March, Assistant Secretary of Labor Phyllis Borzi testified before a Senate committee, expressing concern about whether open MEPs can be treated as single plans under ERISA since there is no commonality among adopters. A recording of her testimony is here, with the MEP comments beginning around the 36th and 43rd minutes. Some commentators thought the testimony was a sign of what DOL’s official position would be, while others suggested it gave no cause for concern, because the Internal Revenue Code does not require the commonality that Asst. Sec. Borzi described.
I was recently asked to write an article on ERISA Section 404(c). As I contemplated how to approach the article, I recalled many situations in which I have heard 404(c) pitched as the mythical silver bullet to save plan fiduciaries from the specter of liability associated with participant-directed investments.
An article appeared yesterday on CFO.com entitled “New 401(k) Obligations Heaped on CFOs” and it carried a tagline stating “New disclosure rules abound, but pay close attention or you could be sued by plan participants.”
Qualified plans are complicated beasts regardless of size or design. This truth is sometimes forgotten at this time of year when sponsors and service-providers are busy dealing with nondiscrimination testing and contribution calculations. I've many situations in which a plan sponsor decided to skip testing for a year, because their plan was so easy there was no way it could fail. Similarly, I've seen service-providers decide to skip the critical peer review step in their process, because nothing could possibly have been missed on such an easy plan.
Over the last few weeks, I have spoken with at least four plan sponsors who just became aware that they missed the April 30, 2010 deadline to restate their plan documents for EGTRRA. For those in certain federally declared disaster areas, the deadline was extended to July 30, 2010.
As the EGTRRA restatement window closes for pre-approved DC plans and begins to open for pre-approved DB plans, I thought I would pontificate on the importance of the plan document. Qualified plans are required to be maintained pursuant to a written plan document. Operating the plan inconsistent with terms in that document is an operational failure that can threaten a plan’s qualified status.