Make sure that
agreements with service providers clearly
disclose both direct and indirect fees,
including float income, shareholder
service fees and 12b-1 fees. Pay only
those amounts the Labor Department
considers legitimate plan expenses. Paying
other types of expenses can lead to
charges of breach of fiduciary duty and
prohibited transactions, as well as the
payment of interest and penalties.
Deposit 401(k)
contributions in a timely and regular
fashion. Depositing funds quickly even
once may be viewed as binding by the
Department of Labor and become the
standard by which all other deposit
times are judged for compliance.
Revise
distribution forms to reflect any new
regulatory requirements. Some plans are
currently required to add “relative
value” language regarding optional plan
distribution alternatives that will
require changes in the distribution
forms of affected plans.
In the case of
health plans, revise the plan procedures
and forms to comply with new final COBRA
regulations.
Review the
procedures followed by the company
officials who appoint your plan’s
fiduciaries (typically company
directors). If necessary, revise them to
make sure they comply with the standards
the Department of Labor articulated in
high-profile cases such as Enron.
Determine
whether items on the plan’s form 5500
might raise audit red flags.
Make sure the
plan is in a position to impose
market-based restrictions on trading if
required to do so by the underlying
investment or if the plan needs to do so
to protect participants’ interests.
Impose and
disclose in the plan’s
death-benefit-beneficiary forms who the
default beneficiary will be if the
participant fails to name a beneficiary
or if the beneficiary predeceases the
participant. Make it clear that only
designations contained in the
plan-provided form will be reviewed to
determine beneficiary status. If the
form allows the naming of multiple
beneficiaries, make sure it provides a
default allocation among those
beneficiaries if the participant fails
to do so.
Make sure the
plan grants the plan administrator
sufficient discretion to decide benefit
matters, including who is eligible and
for what benefit. That way, if a denied
claim is challenged in court, the court
will review the plan administrator’s
denial based on whether the
administrator’s decision is reasonable
and not on what the court would have
done. |