The Plan Document of a company’s tax qualified retirement plan is the governing document outlining what actions may be taken in the effort to administer the plan. Plan Documents outline the purpose of the plan and describe the relationship between the plan and all parties. The physical document s likely in the range of 25 to 50 pages in length. If the reader of this article is a plan fiduciary, do you know what is in your Plan Document? Do you know how the plan document reads and what it states?
The Cost of not Knowing
In a case originally filed in December of 2010, the U.S. District Court of Northern California recently found retirement plan fiduciaries personally libel and responsible for more than $870,000.00 in losses incurred by retirement plan participants. As stated by Rebecca Miller, senior director at audit, tax and consulting firm RSM US LLP, “The case exemplifies the need for plan sponsors to have read and understood their plan document and to maintain accurate plan records” as reported by Bloomberg BNA in an Oct. 28 e-mail.
In this case there were very explicit directions within the plan document as to how plan distributions were to occur in the event of a plan termination. California Pacific Bank plan fiduciaries failed to follow those directions. Those imprudent actions resulted in the over 5 years in the courts and plan fiduciaries being ordered to pay the plan participants from personal assets.
Your Plan Specifics
It may not be the responsibility of every plan fiduciary to know all provisions of a plan; however, every plan fiduciary should know, which fiduciary (or which retirement plan committee member) does know the language and plan document. It is not a crime for a fiduciary to not read the plan document, but it is irresponsible to not know who has read the plan documents and upon whom you can rely.
