One of the most important tasks for a professional managing their company’s ERISA retirement plan is to actually read the plan documents. It’s surprising how many people don’t take this simple step thinking that their record keeper or TPA will take care of everything. Ultimately, a plan sponsor is responsible, not the providers. So what are the most common mistakes with plan documents, other than not reading them?
According to ERISA attorney Ary Rosenbaum, the most common mistakes include:
- Missing Plan and Amendments – It’s more than embarrassing when regulators ask to see plan documents and they have gone missing. In addition, as laws change, the documents have to be amended. If you find that some are missing or out of date, there are methods to voluntarily correct the problems.
- Operational Conflicts – The plan is not operating in accordance with the documents.
- Summary Plan Descriptions (SPDs) – Plans are required to give participants SPDs but some are in conflict with the actual plan documents which can lead to litigation. Ultimately, the plan documents rule but inconsistencies can lead to liability.
- Hard to Implement Language – Plan documents should be written in simple, unambiguous language which is not difficult to understand. If not simple, chances are the plan is not running according to the rules.
- Outdated Documents – Plans and companies change. So should the plan documents.
So it’s prudent for professionals running their company’s ERISA plan to read the plan documents and the SPD to make sure they are easily accessible, that the plan is being run according to the documents, that there are no conflicts and that no changes are needed. Hiring an ERISA attorney to review every few years or when there are changes is key and, just like with financial advisors and CPAs, not all lawyers are ERISA experts. Hiring a third party vendor not experienced with retirement plans is the single biggest mistake plan sponsors make.
