Thank you to all the plan sponsors and advisors who attended the second annual Employee Benefit Plan Roundtable discussion. For those who were unable to attend, we have prepared a summary of the important items that will affect your plan.
Two regulations will go into effect during 2012 impacting the disclosure of plan fees.
Regulation 404(a)(5) centers around the disclosure of fees to plan participants. The purpose of this standard is to inform every participant of how much they pay each quarter for their employer sponsored retirement plan. Plan sponsors are required to provide participants with quarterly statements detailing the fees and expenses paid from each of their investments as well as a comparison to the fees and expenses of the other investments offered in the plan. There is a specific format required for this disclosure to ensure participants can easily understand and compare their fees and expenses to that of other plans.
Regulation 404(b)(2) requires the plan sponsor to determine if existing service arrangements are reasonable and obtain a written service agreement. This regulation also requires plan service providers to disclose several things to the plan sponsor such as: compensation received, services provided, fiduciary status and any conflicts of interest. Thus, this regulation will enable plan sponsors to determine the true cost of their plan which was formerly netted in their return on investments.
Department of Labor Update
The Department of Labor (DOL) recently conducted a survey of eligible plan participants. Seventy percent of the youngest generation of employees reported they were not participating in their employer’s retirement plan. As a result of this shocking statistic, the Department of Labor is developing new educational materials to aid plan sponsors in encouraging this generation to save for retirement.
Due to several frauds from April 2009 through November 2011 where plan sponsors failed to deposit participant contributions into retirement plans, the DOL continues to focus on the timely remittance of participant contributions. The exact rule for timely remittance states that contributions must be remitted to the plan as soon as they are reasonably segregable from company assets no later than 15 days from the paid date. Plan sponsors should not rely on the 15 days mentioned in this rule. The common test to determine if contributions are timely remitted is to look to the timing of payment of payroll tax deposits of the employer. If payroll tax deposits can be remitted within three business days, it is reasonable to expect that plan contributions can be remitted in the same time frame.
Accounting Standards Update
There are new standards regarding how an accountant opines on supplementary information. Thus, if your plan is audited, the engagement letter should reflect this change. Due to this change, engagement letters for plan audits will not be issued until April or May when the new verbiage is released.
Accounting Standards Update 2010-06 regarding level three investments is effective for periods beginning after December 15, 2010 (calendar year 2011). Thus, plans with level three assets will report the gross amounts of purchases, sales, issuances and settlements which occurred within their level three investments in gross amounts instead of net as previously allowed.
If you have any questions concerning any updates mentioned in this article or your employee benefit plan please do not hesitate to contact one of our experts at (402) 423-4343.