Posts Tagged ‘ERISA’

Don’t Forget About Your ERISA Fidelity Bond

Wednesday, February 11th, 2015
Don't Forget About Your ERISA Fidelity Bond

Avoid problems with the Department of Labor, make sure you know the ERISA fidelity bonding requirements.

If your company offers a retirement plan to its employees, make sure you are familiar with the Employee Retirement Income Security Act’s (ERISA) fidelity bonding requirements and the information you must include on your plan’s annual Form 5500.

Over the years we have noticed that many clients struggle with obtaining and keeping an active and accurate ERISA fidelity bond because of a general lack of understanding. The purpose of the fidelity bond is to protect your plan’s assets from the risk of loss due to fraud or dishonesty by employees handling the plan’s funds, such as when remitting plan contributions.

The required bonding amount is “10 percent of plan assets handled.” Because this is a difficult number to know with certainty, most plan trustee’s make sure the plan is bonded for at least 10 percent of all plan assets. This means that as your plan’s assets grow, so does your required bonding amount. There are two primary exceptions to this rule:

  1. The maximum required amount is $500,000 – regardless of your plan assets.
  2. If your plan has more than 5 percent non-qualifying plan assets, then a bond is needed to cover the amount of non-qualifying plan assets.
    • “Non-qualifying plan assets” includes anything that is not a marketable security held by a bank, trust company, registered broker-dealer or insurance company.
    • If a bond in the correct amount is not established, then an independent plan audit by a certified public accountant is required. These audits cost about $10,000 annually.

Even if your plan only contains qualifying plan assets, not maintaining a fidelity bond in the proper amount can be a red flag to the Department of Labor, which could prompt them to take a closer look at your plan.

NOTE: A fidelity bond is different than fiduciary insurance. Fiduciary insurance is not required, but should be in place to protect your plan fiduciaries from personal risk of loss. Your plan fiduciaries include any employee who serves as a plan trustee or who is on a plan investment committee tasked with ensuring that your plan is free from errors or omissions that could result in loss to your plan. Plan fiduciaries are personally liable for these potential losses, so having fiduciary insurance coverage is prudent (albeit not required).

To learn more about the ERISA fidelity bond requirements, email Rea & Associates.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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Employee Welfare Benefit Plans Making Your Head Spin?

Friday, December 28th, 2012

Every year, we receive questions regarding whether a filing requirement exists for a client’s welfare benefit plan. Clients want to ensure that their plans remain ERISA compliant without taking on the burden of any unnecessary paperwork.  Here are answers to some of the most frequently asked questions about employee welfare benefit plans. (more…)

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What Changes Do Pension Plans Need by Year-end?

Thursday, November 29th, 2012

In the midst of the publicity surrounding the new ERISA fee disclosures requirements, it is important not to lose sight of the fact that other recently enacted legislation may impact your retirement plan.  Changes to IRS regulations may require plan’s to adopt amendments before the end of the year.  (more…)

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Do You Need to Send an Annual Notice to Your 401k Participants?

Friday, November 2nd, 2012

Does your 401k plan have a calendar year end? If so you have until December 1, 2012, to send notice requirements to plan participants or the operation or qualification of your plan could be impacted. Use this checklist of notices to get started: (more…)

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Who is Responsible for Fidelity Bonding?

Friday, October 26th, 2012

When it comes to following the ERISA requirement of fidelity bonding, the devil, as they say is in the details.

The Employee Retirement Income Security Act of 1974 (ERISA) requires that fidelity bonding be obtained to cover each person who “handles” plan assets.  The general rule is the bond amount be ten percent (minimum of $1,000) of plan assets as of the beginning of the plan year, not to exceed $500,000, or one million dollars if the plan holds employer securities.

While this requirement seems relatively straightforward, we find plan sponsors are sometimes unclear about their fidelity bond responsibilities when we are performing  benefit plan audits.   Following are some of the commonly asked questions. (more…)

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You’ve Received Fee Disclosures, Now What?

Thursday, August 23rd, 2012

It’s Your Turn to Disclose Fees to Participants

Did you suffer from sticker shock when you received the recent fee disclosures from your service providers? If so, you weren’t the only plan fiduciary to be surprised, even though it’s your job to know the ins and outs of your pension plan.

Now, by August 30, you have to disclose that fee information to your plan participants. How do you think they will react? It is possible they aren’t going to like the news. Worse yet, they may be confused as to why they are suddenly paying new fees when the reality is they have always paid them. Being upfront about plan costs, and plan benefits, can help you make it through this new disclosure requirement. (more…)

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What is a Roth 401(k)?

Thursday, June 21st, 2012

Understanding Employee Benefit Plan Types

In 2001, a new retirement plan option was created.  Although this option, known as a Roth 401(k), has been around for a few years now, there’s still some confusion about how it works and what makes it different from a traditional 401(k).  As a plan sponsor, you need to understand the Roth 401 (k) and its benefits so that you can be sure that you’re offering the right retirement plan options to your employees. (more…)

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Do You Understand the New ERISA Fee Disclosures?

Wednesday, June 13th, 2012

408(b)(2) Regulations Help Meet Fiduciary Responsibilities

Are you wondering why there is so much buzz these days about ERISA Section 408(b)(2) fee disclosures? After all, your service provider tells you what you pay for the services provided, right? Maybe.

Service provider pricing and compensation can be structured many different ways, so it may prove difficult for you, a responsible plan fiduciary (RPF), to evaluate plan fees. The Department of Labor (DOL) recognizes this and, in  408(b)(2) regulations, is mandating what information is to be disclosed to help you assess the reasonableness of fees paid for by the plan. The regulations also aim to help identify conflicts of interest that may impact a service provider’s performance. (more…)

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Can Benchmarking Uncover Money Hiding in Your Retirement Plan?

Tuesday, June 5th, 2012

Benchmarking may result in potential savings

Could you use an extra $26,000 a year? A plumbing company realized that savings after discovering it was overpaying recordkeeping and investment fees in its retirement plan.

By benchmarking the plan, this company saw how the fees compared to plans of a similar size across the country. This provided the plan sponsor with solid data to discuss fees with current providers.

While there are plans out there where reasonable fees are being paid, that’s not the case in every situation. From a law firm that saved $46,000 in investment fees to an administrative services firm that reduced its annual recordkeeping fees by $50,000, some plan sponsors have found that their plan fees are not in-line with similar plans. (more…)

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What does the new ERISA regulation mean for plan sponsors?

Friday, March 30th, 2012

If your company sponsors a 401k plan, a new ERISA regulation could mean extra paperwork… and potentially extra liability. (more…)

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Have You Determined a Beneficiary for Your Retirement Plan?

Friday, November 11th, 2011

A single dad wanted to designate his two children as beneficiaries of his retirement benefits. He mailed his beneficiary designation form to his employer with a cover letter explaining his wishes. When he died, the benefits administrator noticed the designation form wasn’t signed. Should the plan assets pass to the estate or the children? (more…)

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What Kind of Fiduciary Are You?

Monday, July 25th, 2011

Over the years, I’ve worked with many clients who served as fiduciaries for their company’s retirement plan. It’s a serious position. When you serve as a fiduciary, the position comes with responsibility outlined by ERISA, including keeping track of reasonable fees, completing and following an investment policy and providing guidance to participants. Unfortunately, plan fiduciaries who do not fulfill their duties can be found liable by the Department of Labor, and participants have also successfully sued fiduciaries in civil actions. (more…)

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Determining a Retirement Beneficiary? It Isn’t Always Simple

Monday, June 20th, 2011

A single dad wanted to designate his two children as beneficiaries of his retirement benefits. He mailed his beneficiary designation form to his employer with a cover letter explaining his wishes. When he later died, the benefits administrator noticed the designation form wasn’t signed. Should the plan assets pass to the estate or the children? (more…)

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Are you following fiduciary best practices?

Tuesday, May 3rd, 2011

If you operate a retirement plan, you’re probably well aware that your position as a fiduciary is facing increasing scrutiny – and increasing liability and risk. In addition to increasing rules from the Department of Labor, recent lawsuits and settlements have highlighted the “significant potential liability for breach of fiduciary duty.” (more…)

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Not Communicating Health Benefits? ERISA Could Fine Your Company

Friday, March 11th, 2011

An Illinois healthcare company was fined $5,880 by a judge in U.S. District Court for not complying with the Employee Retirement Income Security Act’s provision by delaying to provide a summary plan description (SPD) to a plan participant beneficiary. (more…)

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