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What Your Company Must Disclose to You About Your Retirement Plan

Fri, 12 Jun 2009 18:27:43 GMT

Do you have questions about your employer sponsored retirement plan? Many employees do and rightly so since they invest their hard earned money in those plans and then relinquish much of the administration and control of the plan to others. Employees are entitled to specific information about the plan in which they participate if the plan falls under the jurisdiction of the Employee Retirement Income Security Act of 1974 (ERISA). ERISA applies to most private employer retirement plans.

Information You are Entitled to When you Enroll

Within the first 90 days of your participation in the retirement plan, you should receive a Summary Plan Description which describes your benefits, rights and obligations in clear and easy to understand language. It is important to carefully review this document and review any questions or concerns with the plan administrator.

Information You are Entitled to Periodically

Additional information must be provided to plan participants periodically. That information includes:

· Summary of Material Modification: this needs to be provided to participants and beneficiaries within 210 days of the end of the year in which the material modification occurred.

· Summary Annual Report: this narrative report should be automatically provided to every participant and beneficiary within 9 months of the year end.

· Periodic Pension Benefit Statement: this should be provided quarterly if employees direct their own investments and annually if the employer directs the investments. The statement must include the value of specific investments within the account. With proper notice to employees about their right to such a statement, it may be provided less frequently.

· Notification of Significant Reduction in Future Benefit Accruals: disclosure of significant reductions in future benefit accruals should be made to participants about 45 days before the change takes place.

· Annual Funding Statement: participants and beneficiaries should receive annual notice about the funding condition and financial health of the retirement plan.

· Notice of Intent to Terminate: If the employer intends to terminate the plan then notice must be provided to participants and beneficiaries between 60 -90 days before the termination is to take place. The Notice should include options available for participants and beneficiaries.

Information You are Entitled to Upon Request

If you request the following information in writing then the plan administrator must provide you with copies within 30 days:

· Plan Documents: plan documents include the latest summary plan description, Form 5500, trust agreement and other instruments under which the plan is established or operated.

· Statement of Accrued and Nonforfeitable Benefits: your employer is required to provide this information to you once a year, if you so request.

The notifications described above are just a sampling of the important notifications that need to be provided to retirement plan participants. Employers have the responsibility to furnish the notifications and employees have the responsibility to review them so that employees understand specific information about their retirement benefits.

Retirement plans should not be secretive and you should not be surprised when you open your first benefits statement upon retirement. ERISA encourages open communication with employees about their retirement benefits. If you have any question about the frequency or content of your notifications then you should not hesitate to contact your plan administrator for further explanation.

What You Should do If Your Retirement Plan has Been Mismanaged

Fri, 12 Jun 2009 18:28:23 GMT

Retirement benefits are an important part of your employment compensation package. For many people, these plans are the most cost effective way to save for retirement. However, with the benefits of retirement plans come some risks. Individual employees must count on the plan’s administrator and other fiduciaries to make important decisions that will affect the amount of money that is available to each individual employee upon retirement.

While employees often have no choice but to put their trust in the plan’s fiduciaries, employees are entitled to certain information and to make sure that the plan is being run in the best interest of the plan holders. When information comes to light that indicates that the fund has been mismanaged then individual employees have rights available to them to remedy the situation.

The Employee Retirement Income Security Act of 1974 (ERISA) is the federal law that provides protections to employees who participate in employer sponsored retirement plans. ERISA provides protection to most employees with private employer retirement plans. However, it does not apply to most government employees or to employees of some religious institutions.

Contact the Plan Administrator

The first step that you should take is to contact the retirement plan administrator and ask questions. You want to know if the plan administrator is aware of what you know and whether the administrator has a good reason for it happening. If the administrator is not able to provide you with a satisfactory explanation for your allegations then you should consider filing a grievance.

File a Grievance According to the Plan’s Terms

Each employee retirement plan that falls within the jurisdiction of the Employee Retirement Income Security Act of 1974 (ERISA) should have an explicit grievance plan which you can follow should you suspect plan mismanagement. The grievance procedure should require the plan administrator or his or her designee to investigate the allegations and provide you with an explanation of the findings.

Administrative Remedies

If the grievance procedure does not satisfactorily resolve your claims then you may be able to bring an administrative action against the plan fiduciaries. The Department of Labor can informally seek resolution of disputes, conduct investigations and require employers to remedy any violations of the ERISA law. State departments of labor may also have administrative remedies that you can pursue.

File a Lawsuit

Employees who contribute to retirement plans that have been allegedly mismanaged may also file a lawsuit concerning plan mismanagement or breach of fiduciary duty. If you are successful in your lawsuit then you may be able to recover financial damages and prevent any future misconduct. A judge is likely to look at whether you made requests for information in writing concerning the alleged mismanagement and tried to work out any misunderstanding or wrongdoing through other methods prior to filing your lawsuit.

Just because you choose to participate in an employee sponsored retirement plan does not mean that you have to relinquish control to make sure that the plan is properly managed. Those who administer and manage the plan have a fiduciary responsibility to act in your best interest. If you believe that that fiduciary responsibility was violated then you should take the actions described above to protect your rights.

Responsibilities of Retirement Plan Managers

Fri, 12 Jun 2009 18:29:14 GMT

Employees who participate in private employer sponsored retirement plans place a certain amount of trust in their employers. Participating employees contribute a certain amount of their salary to the retirement fund and they trust that the money will be well invested and available for them upon retirement. In order to protect the retirement money in employer sponsored retirement accounts, the retirement plan managers have certain responsibilities to plan participants.

Fiduciary Duties

Fiduciary duties must be exercised by anyone who has discretion in administering or managing the retirement plan or anyone who has discretion or control of the plan’s assets. For many private employer sponsored retirement plans, more than one person will fit this definition. According to the U.S. Department of Labor Employee Benefits Security Administration, everyone who meets this definition must:

Act for the sole benefit of plan participants and their beneficiaries;
Follow the requirements of the retirement plan and ERISA;
Diversify investments; and
Pay only reasonable expenses related to the plan.

Retirement plan administrators and others who meet the definition of a fiduciary, face significant potential penalties if they fail to comply with the requirements described above. Fiduciaries can be held personally liable for any losses that are directly related to their failure to meet their fiduciary duties.

It is important for fiduciaries to keep careful and detailed records of any actions that they take with regard to the employee retirement plan. These records can later serve as evidence that the fiduciary met his or her duties and that any loss incurred was due to other reasons such as normal market less. Fiduciaries can also limit their potential liability by giving employees at least 3 sound choices of investment options and letting the employee decide which one to follow.

Auditors

Most plans that have 100 or more employee participants are required to be audited by an auditor at least annually. The auditor must be an independent and qualified certified public accountant. This requirement exists to make sure that retirement plan managers are properly administering the plan and to protect employees. One common concern among retirement plan managers is the cost of annual audits. While it is important to work with an experienced retirement plan auditor and to have a thorough review of the plan, it is possible to save costs by limiting the scope of the review of having a less experienced auditor complete the audit under the direct supervision of a more experienced auditor. If a retirement plan manager seeks to cut costs in either of these ways then it is important to seek the advice of an attorney and to make sure that the audit will fulfill the requirements set forth in by federal law.

Service Providers

There is a lot of work involved in maintaining an employee retirement plan. Therefore, many companies hire service providers to handle the administration of the plan. Those who hire the service providers have a fiduciary duty to make sure that they are diligent in the hiring process so that they hire qualified providers who will work in the employee participants’ best interest.

Employee retirement accounts are a significant employee benefit. Those who administer the plan have legal responsibilities to make sure that employees are protected and that decisions are made in the best interest of the participants.