Best Practices for Benefit Plan Management

The highly regulated employee benefit plan world experienced even further governance during 2010.  Beginning for the year ending December 31, 2009, the IRS and DOL required all 403(b) plans with at least 100 eligible employees to be audited.  Now that the pressure of the October 15 deadline to file the audited financial statements and Form 5500 has passed, it is important for Plan sponsors to begin thinking about how they can improve the day-to-day operations of managing their employee benefit Plan. Whether your organization sponsors a 401(k) plan or a 403(b) plan, the following are five recommended practices to consider:

1. Investment Statement Review – All significant investment reports provided by the Plan Trustee should be reviewed by the Plan Administrator or Pension Committee, if applicable, on at least a quarterly basis to ensure there are no discrepancies in investment activity or elected investment options. These reviews should be documented through simple signoffs or the recording of minutes.

2. Plan Recordkeeping - It is suggested that general ledger recordkeeping be completed on a monthly basis (or at least quarterly) to properly record Plan activity (i.e. contributions, distributions, interest and dividend income). Any discrepancies between the accrual basis general ledger and cash basis investment reports should be documented.  These steps will assist in preparing the Plan’s financial statements and Form 5500 at the end of the year. 

3. Payroll Reports - It is recommended that all participant activity, such as contributions and loan repayments, should be reconciled from the investment reports to the payroll registers on a monthly basis.  Such reconciliations will allow Plan management to detect any improper data or missing participant information on a timely basis.

4. Enrollment Forms - On an annual basis, Plan management should obtain signed enrollment forms from all eligible employees, indicating their contribution election or, on the contrary, election to be excluded from the Plan. The signed forms should be filed and retained within each employee’s personnel file. These steps will help ensure that each employee is aware of the Plan’s existence and that all eligible employees were offered the Plan.
 
5. Beneficiary Forms – Plan management should also obtain signed beneficiary forms from all participating employees and retain them within the employee’s personnel file.  This will considerably limit the Plan sponsor’s level of liability when an event occurs (i.e. death, divorce, etc.) that requires the distribution of a participant’s assets.
Implementing these five practices will not only make next year’s audit process a lot smoother, but will also provide more effective oversight over your employee benefit plans.