The trustees and plan management have an important responsibility and duty to plan participants. To perform these tasks, a formal committee should be set up to oversee the operations and investments of the scheme. This committee generally meets quarterly or monthly. Some of the items to be discussed include plan amendments, investment changes, approval of discretionary contributions and use of forfeitures, monitoring of investments and investment policy, review of SOC 1 reports of service organizations (including review of user controls), plan expenditures, selection and monitoring of third-party service providers and cybersecurity programs.
In overseeing the operations of the plan and performing these duties, many critical decisions are made that affect the plan and its members. It is strongly recommended that plan sponsors keep written minutes of these meetings. This documentation serves not only to commemorate the committee’s decision and actions, but also to demonstrate that careful care is taken to administer the plan and protect plan members and the benefits to which they are entitled.
Another plan governance requirement is the maintenance of signed plan documents and all executed plan amendments. These documents serve as the basis for plan operations. Plan management will want to familiarize themselves with plan documents and amendments, especially when drafted by a third-party service provider, and will periodically review the documents to ensure that they remain current. Understanding and following the terms of the plan are key aspects of plan governance and critical to avoiding plan operational errors. When redrafting plan documents, it is easy to tick the wrong box and unintentionally change plan provisions. A best practice when restating plan documents is to compare the previous version to the current version to ensure that any changes to provisions are intentional.
Plan management should also continuously monitor the plan for required changes to the plan. For example, many plan changes may need to be implemented this year. The CARES Act, Consolidated Appropriations Act of 2021, and SECURE Act included mandatory and optional plan provisions, and plans generally must be formally amended by December 31, 2022 to reflect these plan changes. Don’t wait until December to start the process. We encourage you to speak with your plan document provider as soon as possible so that documents can be drafted and finalized in a timely manner.
Not only are plan amendments and meeting minutes essential for documenting compliance with ERISA and demonstrating compliance with fiduciary obligations under ERISA, but these documents also provide your auditors with the information they will need. you need to properly plan and execute your plan audit. Retaining these documents and providing them to your auditors early will ensure a smoother and more efficient audit.
Access the rest of this blog series below:
Part 1: Census reconciliation
Part 2: Deadline timeline
Part 3: Investment certificate
Part 4: SOC 1 Report