Top areas of focus in Department of Labor investigations of retirement plans

Published July 19, 2019

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The Department of Labor (DOL) is continuing its efforts to expand its examination of Company Sponsored retirement plans. The following are five focus areas of their examinations:

Terminated Vested Participants that are missing or have not commenced benefits at Required Begin Date
There is a big emphasis on finding lost participants from the DOL. Plan Sponsors who cannot find participants can cause Plans to fail to make minimum distributions timely, and for defined benefit plans, can fail to start payments upon retirement age.

Timeliness of Participant Contributions
Participant contributions are treated as Plan assets, and therefore must be deposited into the Plan as soon as can reasonably be segregated from the employers’ general assets. “Small” plans have a safe-harbor of 7 days.  Informally, the DOL has stated that it expects the number of days for “large” plans to be much smaller.  If a Sponsor has demonstrated its ability to make deposits to the Plan in a certain number of days, then that becomes their “reasonable segregation” definition.

Required Plan Documents and Disclosures
All retirement plans under ERISA are required to have an approved Plan Document. This document dictates the rules of the Plan.  Plan Sponsors must provide certain documents to participants including a Summary Plan Description, fee disclosures and required notices. The DOL will request to see all Plan documents to ensure they are up to date with all recent law changes, and that the disclosures and notices are provided or available to employees.

The DOL will almost always request evidence of the Plan’s ERISA bond.  ERISA Section 412 generally requires that every Plan fiduciary and every person who handles Plan assets be bonded for at least 10% of the Plan assets, up to a maximum of $500,000 per Plan ($1 million for plans that holds employer securities).  This bond protects the Plan from theft of Plan assets and is not to be confused with Fiduciary Insurance.

Fiduciary Duties and Prohibited Transactions
The DOL has been consistently focused on enforcing ERISA’s core fiduciary duties and prohibited transactions rules. The DOL will examine whether Plan assets are being used to pay nonplan expenses.  They will look for unreasonable Plan expenses being paid by Plan assets, or any type of loan from the Plan that is improper (excluding participant loans based on a set Loan Policy allowed by the Plan).

For more information on these DOL areas of focus and how they might affect you, please contact your MCM professional or MCM Employee Benefits Manager Becky Barnett, QPA, QKA via e-mail or phone (502.882.4320).