Baden Retirement Plan Services specializes in the consultation, implementation, and administration of tax-qualified retirement plans for companies. We have clients ranging in size from 1 employee to 5,000 employees in 46 states of the United States, but many of our clients are in the Midwest. As an independent third party administrator (TPA), we help companies implement the type of retirement plan that best serves their needs. In addition, we help them operate the plan in compliance with the many Internal Revenue Service (IRS) and Department of Labor (DOL) rules and regulations that must be followed.
[permalink] 401(k) has become a generic term for employer-sponsored retirement plans in which employees share some of the responsibility for their retirement by contributing to their own retirement account through payroll deductions. But, depending on the type of company sponsoring the plan and specific plan design considerations, other types of plans might be more appropriate. Other options would be a retirement plan with only employer contributions such as a defined benefit or profit sharing plan, but these are not as prevalent.
[permalink]We meet with the business owner or a company’s benefits committee and ask them why they are choosing to implement a plan. Many businesses implement a plan to compete with other companies that provide this benefit, or to help the business owners maximize their retirement benefit, or simply to provide a way to help the employees save for retirement. We also ask about employee demographics, financial resources that would be available to provide profit sharing or to match employee contributions, and their commitment to financing and administering the plan. Based on their answers, we can recommend the type of plan that fits best. In many cases, we work with businesses that are referred to us by financial advisors who are looking for a TPA to help them set up plans for their clients.
[permalink]The worst mistake a business can make is to try to implement an employee retirement plan on its own. To function properly, a 401(k) plan requires a team that works together. This team includes the employer (plan sponsor), a financial advisor, an asset provider, and a TPA. Financial advisors help determine a plan’s asset providers (investment choices) and educate the employees on the importance of retirement savings and diversifying investments. It is important to rely on a team of experienced professionals because the consequences for a plan sponsor who does not comply with the laws and regulations are severe and could include heavy civil or criminal penalties.
[permalink]Business owners are eligible for tax deductions and tax credits. They get company tax deductions for the contributions to the plan for the employees and for the business expense of engaging a TPA firm to administer the plan. Depending on the amount that the employer contributes, the deduction can be worth thousands of dollars. Tax credits are available for companies with a new plan and fewer than 100 employees. The credit is equal to 50% of the first $1,000 of administrative and retirement-education expenses they incur for each of the first three years after the adoption of a new plan. The biggest benefit, however, is providing a vehicle for the retirement of the employees, as well as maximizing the business owner’s retirement benefit.
[permalink]Depending on the type of plan, it is not always necessary for the employer/plan sponsor to provide a match for employee’s contributions. Contact your TPA or financial advisor for information on specific plan types that do not require the employer/plan sponsor to provide a match.
[permalink]Off-the-shelf or prototype plans and plan documents are available and approved by the Internal Revenue Service. While these types of plans cost less to implement and administer, they do not allow the employer flexibility to change any aspects of the plan.
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An ERISA fiduciary is determined by function rather than by title. Any person with discretionary authority or control over the management of the employee retirement plan is a fiduciary. Further, any person who exercises any authority or control with respect to management or disposition of the plan’s assets is a fiduciary.
An ERISA fiduciary must discharge all duties with respect to the employee retirement plan solely in the interest of the plan’s participants and beneficiaries and for the exclusive purposes of: 1) providing benefits to plan participants and their beneficiaries; and 2) defraying reasonable expenses of administering the plan
Persons performing only administrative duties within guidelines established by others who are fiduciaries, are not themselves plan fiduciaries. Administrative duties are those that process information and forms but do not involve making any decisions about plan policy.
[permalink]Yes, an employer (plan sponsor) is an ERISA fiduciary because of his/her authority over the management of the company’s retirement plan.
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The general responsibilities of a Plan Administrator, as set forth by ERISA (Employee Retirement Security Act), include providing plan participants with the following information and documents. The documents and information need to be provided within time lines set forth by ERISA:
- Summary Plan Document (SPD)
- Summary of Materials Modifications (SMM)
- Individual Benefit Statement
- Summary Annual Report (SAR)
- Blackout period notices
The general responsibilities of a Plan Administrator also include timely filing of required government reports and forms with the Federal Government, such as the Form 5500 Annual Return/Report.
Additionally, the Plan Administrator overseas or assists with the timely deposit of participants’ contributions to the plan; and loans and distributions from the plan.
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