Retirement | Documents & Policies
Plan Must Be In Writing
Under the Code and ERISA, every qualified retirement plan should be embodied in a written plan document. The plan document should be sufficient to enable the plan administrator (the person operating the plan) to determine who is eligible to be in the plan, when eligible employees enter the plan, what benefits are available, how the plan is financed (i.e., employer contributions, employee contributions, or both), how and when the benefits are paid, and how claim disputes are resolved. Since the plan is intended to be a "qualified" plan in accordance with the Code and IRS rules, it must contain certain plan language. In order to make sure that the plan document contains the plan language necessary and appropriate for a qualified plan, the employer should use either a pre-approved form of plan (e.g., an IRS approved prototype or volume submitter plan) or obtain IRS review of its plan document as part of the IRS's determination letter program. The plan document should be kept with the sponsoring employer's important papers and it should be kept up to date as the employer makes changes to the plan.
Summary Plan Description (SPD)
ERISA requires that every plan be summarized in lay terms in an SPD. The specific requirements for the contents of an SPD are contained in regulations published by the United States Department of Labor (DOL). The SPD must be provided to each participant in the plan within 90 days after he or she becomes a participant. A copy of the SPD need not be sent to the DOL unless the DOL requests a copy. If a subsequent amendment to the plan results in a change in any of the information required to be in the SPD, a supplement to the SPD must be distributed to all participants within 210 days after the end of the plan year in which the change was adopted. If the plan has been amended, an SPD incorporating all amendments to the plan must be provided to the participants every 5 years. If the plan has not been amended, another copy of the SPD must be provided to the participants every 10 years.
Summary Annual Report (SAR)
Each year, the plan administrator of a plan that is not exempt from filing a Form 5500 must provide an SAR to the participants within nine months after the end of the plan year. The SAR summarizes the information provided on the Form 5500 and tells the participants how to obtain a copy of the Form 5500. The requirements for a SAR are set forth in the DOL's regulations.
Claims Procedures
ERISA requires that employee benefit plans provide claims procedures. These procedures must allow a claimant to appeal a denial of benefits.
Other Policies And Procedures
In order to ensure that all of the required notices, elections, disclosures, and tests are handled in a timely and uniform manner, the plan administrator (with the help of its advisors) should adopt various policies and procedures. The policies and procedures that may need to be adopted are those for:
- Enrolling participants.
- Governing participant-directed investments.
- Making hardship distributions.
- Making participant loans.
- Making retirement distributions.
- Reviewing and processing QDROs.
- Investing plan assets on a pooled basis.
- Regarding any nondiscrimination testing that is required.
- Regarding plan reporting to the government (including the preparation of an accountant's opinion if required).