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Compliance Responsibilities with Employee Benefit Plans

Internal Revenue Code and ERISA Rules

If you’ve ever had access through your job to a 401(k) plan, or a pension plan, or have had medical coverage under a group health plan, then you know these are great benefits, but what you might not know, (or might not fully recognize), is the degree to which federal law imposes significant compliance responsibilities on the employer for having these benefits.

These include a large set of very technical rules under the IRC, which exist primarily because of the major tax advantages that these benefit plans offer to both the employer and the employee.

In addition, there are numerous safeguards and protections for employees under ERISA, including fiduciary duties imposed on the persons who are responsible for running the plans.

Specifically, ERISA requires a plan fiduciary to act prudently, loyally, solely in the best interests of the plan and its participants, and in accordance with the plan’s governing documents.

Also, a fiduciary can’t have the plan enter into what’s known as a non-exempt prohibited transaction. And an example of this might be borrowing money from the plan for company purposes, or causing the plan to pay unreasonably high fees for its investments or for the services it receives.

Know Your Role

Whether you’re the founder of a fast-growing startup that’s thinking for the first time about setting up benefit plans to help retain and motivate your growing workforce, or whether you are a newly appointed officer or HR professional in a mature company, it’s important that you at least have a basic understanding of these responsibilities so that you can be better equipped to carry them out and manage the risks that come with them.

Who is a Fiduciary?

We’ve touched on the basic fiduciary duties under ERISA – that is, to act prudently, loyally, solely in the best interest of the plan and its participants, and in accordance with the plan’s governing documents.  So the question is, who is a fiduciary?

You might be a fiduciary even though you aren’t officially appointed or designated as a fiduciary in a document. 

Generally speaking, if you have any discretionary authority or control over the administration or management of the plan, or its assets, then you likely are a fiduciary to that plan.  

Managing Fiduciary Responsibilities

Some of the basics for managing your fiduciary responsibilities include:

  • Establishing a sound governance structure for your plans-such as appointing a committee that meets regularly and carefully documents its decisions and actions.
  • In addition, it’s important to be smart about hiring the right service providers. For example, for your retirement plans, you will need a recordkeeper, custodian, an investment advisor, and possibly an auditor. Fortunately, most of the fees for these services can be paid from plan assets, so long as the fees are reasonable.
  • Also, you must be vigilant regarding the operation of the plan. Mistakes will happen. Once discovered, it’s important not to ignore them or delay in addressing them. Instead, seek professional help on how best to correct the mistake.

These are just a few basic tips. For more information, please don’t hesitate to contact us.







Porter, Mary L.

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