Making the connection

Transcription

1 Health This WisdomWorkplace & Wellness and webinar employee program motivation: in conjunction with Empower Retirement Making the connection is brought to you by United Benefit Advisors Health and Productivity Solutions Kristin Tugman August 27 th

2 Top (k) Plan Mistakes and Advisor Opportunities For investment professional use only. Not for public distribution. FOR EDUCATIONAL PURPOSES ONLY. Not intended to be a substitute for specific individual tax, legal, or investment planning advice.

3 The information provided today is for general education purposes. This is not intended to give financial, legal or tax advice. For that kind of specific financial help, please see your financial planner, lawyer or accountant.

4 Agenda IRC Tax qualification errors Inconsistency between plan document and operations Omitting eligible employees Using wrong definition of compensation Errors with plan loans DOL Fiduciary or prohibited transaction errors Selection and monitoring of service providers Identifying and managing fiduciaries Late deposit of salary deferral contributions Failure to follow written guidelines General Missed delivery of required participant notices Failure to conduct comprehensive annual plan audits 3 For investment professional use only. Not for public distribution.

5 Error #1 Inconsistency Between Plan Document and Plan Operations Plan Document Provisions Record Keeping System Set Up Plan Sponsor Practices 4 For investment professional use only. Not for public distribution.

6 Error #1 Inconsistency Between Plan Document and Plan Operations Common Causes Change in record keeping system Plan amendments or restatements New hires performing plan functions Advisor Opportunities Work with record keepers whose plan implementation practices are reliable & who communicate effectively. Make sure your clients understand who is responsible for maintaining their plan document and that they flag the need for year end amendments when discretionary changes are made. Advise your clients to audit core plan functions (eligibility, definition of compensation, loans and hardships, etc.) whenever they hire a new staff person who is involved in these activities. 5 For investment professional use only. Not for public distribution.

7 Error #2 Omitting Eligible Employees Common Causes Plan document contains different eligibility provision for different plan features Company uses part-time and/or temporary employees Employees are rehired or return from leave Plan uses automatic enrollment and automatic escalation Advisor Opportunities When prospecting for a company that has any of these plan design features or types of employees, offer to conduct an audit of how eligibility was applied may want to work with TPA. 6 For investment professional use only. Not for public distribution.

8 Error #3 Using the Wrong Definition of Compensation Common Causes Plan document says all W-2 Compensation but bonuses or other non-routine elements of compensation are excluded. Non-cash forms of compensation (ex., car allowances) are excluded improperly. Advisor Opportunities When prospecting look at all definitions of compensation in the document and ask questions if plan uses inconsistent 7 For investment professional use only. Not for public distribution.

9 Error #4 Errors With Plan Loans Common Causes Multiple loans Administering loans during leaves of absence Handling loans of bankrupt participants Advisor Opportunities Ask prospective clients how satisfied they are with their plan s loan activity. Working with a TPA, offer to audit multiple loan or leave of absence loan activity. Suggest improvements to the plan s loan policy that would simplify the process and minimize risk. 8 For investment professional use only. Not for public distribution.

10 IRS Sanctioned Correction Programs Self-Correction Program (SCP) Voluntary Correction Program (VCP) Audit Closing Agreement Program (CAP) General Correction Principles Must be reasonable and appropriate Must restore participants and beneficiaries to position they would have been in had error not occurred Must be consistent with plan document and keep assets in plan Corrective contributions must come from employer (can use forfeitures if plan permits) and be adjusted for earnings For more information on IRS correction programs visit 9 For investment professional use only. Not for public distribution.

11 Barriers to Self-Correction Cost Administrative cost of determining and implementing correction methodology Employer contribution cost to fix error Missing Data Can t find former employees Need data from prior record keeper The Blame Game Is that person/entity at fault still involved with the plan? The Temptation to Roll the Dice What is the real risk of an IRS audit? 10 For investment professional use only. Not for public distribution.

12 Error #5 Service Provider Selection and Monitoring Fees Ensure currently accurate fee disclosure documents are received from all of the plan s covered service providers. Understand what the plan is paying, including revenue sharing payments. Compare fees to market. Monitor fees routinely. Services Have defined criteria for selecting and monitoring service providers. Identify metrics or other methods to measure the value of services over time. If paying above market prices, identify and document the additional value the plan is receiving. Advisor Opportunities Provide clear, easy to understand fee disclosures. Develop practices to ensure fees remain reasonable over time. Assist with benchmarking or other fee comparison services. Articulate your value and, to the extent possible, use and report metrics to demonstrate. 11 For investment professional use only. Not for public distribution.

13 Error #6 Identifying and Managing Fiduciaries External Fiduciaries (service providers) Review 408(b)(2) disclosure to ID fiduciary status Understand scope of fiduciary role Manage remaining fiduciary risk Internal Fiduciaries (employees) Identify (limit?) fiduciary roles Select qualified employees Provide ongoing education and training Provide for access to experts as appropriate Protect (through insurance and/or indemnification) Advisor Opportunities Be clear re/your own role Assist plan sponsor with identification of any other plan fiduciaries Provide access to training and expertise to support the role of internal fiduciaries Assist the plan sponsor with selecting internal candidates for Trustee or Administrative Committees 12 For investment professional use only. Not for public distribution.

14 Error #7 Late Deposit of Salary Deferral Contributions Legal Deadline Legal standard is that 401(k) deferrals must be turned over to the plan trustee at the earliest date they can reasonably be segregated from company assets. The DOL issued proposed regulations creating a safe harbor for plans with < 100 participants. Salary deferral contributions remitted to the plan trustee within 7 business days from the payroll date are within the safe harbor. No safe harbor was created for plans with 100 participants. Automatically an ERISA violation if deposited more than 15 business days after the end of the month in which the payroll date occurred. Advisor Opportunities Alert your clients to the importance of educating employees handling the remittance process at their company about what the rules are and the consequences of violating them. Offer a direct payroll provider to trustee solution. If you know your client s deposit is late, advise them to deposit ASAP with earnings For investment professional use only. Not for public distribution.

15 Error #8 Failure to Follow Written Guidelines Common Causes Failure to ID all relevant documents (plan document, SPD, amendments not yet incorporated into plan document, investment policy statement, loan policy, minutes of committee meetings, etc.) Multiple service providers involved with the plan and inadequate communication among them. Relying on templates (loan policy and IPS) without verifying consistency with desired practices. Failure to keep all documents current as practices change. Advisor Opportunities Establish and maintain communication protocols among the plan sponsor and all plan service providers. Become familiar with what the Plan Document, the IPS, and Board Minutes or any other document that might govern how plan investment decisions are made. If offering a template IPS, make sure it is consistent with the plan s investment philosophy and practices and review it periodically to ensure it remains consistent. 14 For investment professional use only. Not for public distribution.

16 Correcting ERISA Violations DOL offers a Voluntary Fiduciary Correction Program (VFCP) Relief is limited to specific violations (including late deposit of salary deferrals, issues with participant loans, and paying excessive compensation). A filing with DOL is always required there is nothing similar to the IRS s Self-correction Program. General standard for correction is that participants and beneficiaries must be restored to the position they would have been in had the error not occurred. For more information about VCFP visit 15 For investment professional use only. Not for public distribution.

17 Error #9 Missed Delivery of Required Participant Notices Common Cause Overwhelming Number Inconsistent Rules SPD & SMM SAR Safe Harbor Notice EACA, QACA, or other auto enroll notice 404(c) or QDIA notice Employer stock diversification notice Benefit statements Participant disclosures fees and investments Required distribution notices Black out notices QDRO notices EIAA notices 16 For investment professional use only. Not for public distribution.

18 Error #9 Missed Delivery of Required Participant Notices Advisor Opportunities When a new plan is being set up or a new feature is being added to a plan that triggers a notice requirement, make sure your client has identified who is responsible for providing any required notices. Assist your clients with hiring the right service providers (record keepers and/or TPAs) to meet their needs for preparation and delivery of required notices and disclosures. 17 For investment professional use only. Not for public distribution.

19 Error #10 Failure to Conduct a Comprehensive Annual Audit Common Causes Not working with knowledgeable service providers Unwillingness of management to devote the necessary time What Should be Covered Everything we talked about today Plan investments Plan success metrics & retirement readiness Plan budget and integration with company objectives New legal requirements Changes in employee demographics and/or company structure Possible plan design changes 18 For investment professional use only. Not for public distribution.

20 Error #10 Failure to Conduct a Comprehensive Annual Audit Advisor Opportunities Make it easy and worthwhile Collect relevant data and produce easy to read reports. Track key metrics over time and use to ID possible plan design changes, educational needs, or other changes. Use as an opportunity to reinforce your value to the plan and to key decision makers. 19 For investment professional use only. Not for public distribution.

21 Questions? Thank you for your time.

22 Bank of America Corporation ( Bank of America ) is a financial holding company that, through its subsidiaries and affiliated companies, provides banking and investment products and other financial services. Merrill Lynch, Pierce, Fenner & Smith Incorporated ( MLPF&S ) is a wholly-owned subsidiary of Bank of America Corporation, and a registered broker-dealer and member of FINRA and SIPC. Investment products offered through MLPF&S: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed The views and opinions expressed in this presentation are not necessarily those of Bank of America Corporation; Merrill Lynch, Pierce, Fenner & Smith Incorporated; or any affiliates. Nothing discussed or suggested in these materials should be construed as permission to supersede or circumvent any Bank of America, Merrill Lynch, Pierce, Fenner & Smith Incorporated policies, procedures, rules, and guidelines. Empower Retirement is not affiliated with Bank of America Corporation, or any of its subsidiaries. 21 For investment professional use only. Not for public distribution.

23 Disclosures Core securities, when offered, are offered through GWFS Equities, Inc. and/or other broker dealers. GWFS Equities, Inc., Member FINRA/SIPC, is a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. Empower Retirement refers to the products and services offered in the retirement markets by Great-West Life & Annuity Insurance Company (GWL&A), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York, Home Office: NY, NY; and their subsidiaries and affiliates. The trademarks, logos, service marks, and design elements used are owned by their respective owners and are used by permission. These materials do not constitute legal advice. Representatives of GWFS Equities, Inc. are not registered investment advisors and cannot offer financial, legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor as needed. PT (02/16) 22 For investment professional use only. Not for public distribution.

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25 This program has been submitted for 1.50 (General) recertification credit hours toward PHR, SPHR and GPHR Health & Wellness and employee motivation: Making the connection recertification through the HR Certification Institute. Please note that the program ID number to apply for HRCI credit will be ed to all attendees once we receive Health the and approval Productivity from the Solutions HR Certification Institute. Kristin Tugman August 27 th

26 References Continued 13. Leiter, M.P., Jackson, N.J.,Shaughnessy, K., (2009). Contrasting burnout, turnover intention, control, value congruence, and knowledge sharing between baby boomers and generation X. Journal of Nursing Management, 17, Sommers, D. & Franklin, J.C., (2012). Employment outlook : : Overview of Projections to Monthly Labor Review, Bureau Thank of Labor you Statistics, for your participation in the UBA WisdomWorkplace presentation. To 15. view James, J.B., a recording Swanberg, J.E., & McKenchie, of this S.P. presentation, (2007). Generational differences or to register in perceptions for of older future workers capabilities. The Center on Aging Work and Workplace Flexibiltity, 12, presentations, contact your local UBA Partner Firm. 16. Golden, M. (2013). 7 ways generation X ers differ from baby boomers. Retreived 2013, Boychuk-Duchscher, J.E., & Cowin, L. (2004). Multigenerational nurses in the workplace. JONA, 34(11),