A NON-TECHNICAL REVIEW OF QUALIFIED RETIREMENT PLAN LEGISLATIVE AND ADMINISTRATIVE ISSUES
Recordkeeper / Custodian – The recordkeeping platform in a participant directed 401 ( k ) plan keeps track of the participant ’ s investment selections and account balances . The plan ’ s custodian holds the plan ’ s assets and handles buying and selling of investments for contributions , investment exchanges , and distributions . These services can be provided as a bundle or independently offered .
Other important members of the team :
ULTIMATE OVERSIGHT
Ultimately , the Plan Administrator and Plan Sponsor must ensure that the service providers are fulfilling their duties . By relying on a close relationship with their TPA and Financial Advisor , Plan Sponsors can feel confident that they are creating a plan that will serve the retirement needs of their employees and steer clear of any issues with governing entities . ■
• Payroll Providers – Payroll providers play a key role in 401 ( k ) plans by recording participant salary deferral percentages and calculating the deductions and appropriate taxes on the contributions to the plan .
• Plan Auditor – For plans over 100 participants , a financial statement audit is performed by a certified public accountant .
• Retirement Plan Fiduciary – Though not a requirement , many advisors have migrated to taking on a fiduciary role in retirement plans by acting in a 3 ( 21 ) or 3 ( 38 ) capacity .
• ERISA Attorney – Many Plan Sponsors and TPAs may need the assistance of an ERISA attorney in certain areas of retirement plan administration such as QDROs , voluntary compliance programs , or in the event of a legal action against the plan .
• 3 ( 16 ) Fiduciary – A Plan Sponsor may hire a firm to fill the role of the Plan Administrator as stated in the plan document .
BUNDLED VS UNBUNDLED SERVICING OPTIONS
As with most things in life , there is no perfect answer that fits everyone in every situation . Many of the services mentioned in this article can be linked together and offered in “ bundles .” On the surface , this may seem the easier route , but bundled does not give the Plan Sponsor the ability to evaluate each component on its own , so many trade-offs in services and expertise may occur .
An unbundled approach strives to offer the Plan Sponsor a more a la carte approach to the services they use to design their plan . With a good TPA and advisor relationship , the Plan Sponsor can be easily guided through the selection process by relying on the experience of these professionals . Many believe this approach ultimately ends up with the design and structure that works best for their employees . Be aware that , though cheaper fees and overall costs may be offered through bundled providers , it is possible that recordkeeping or compliance costs are being offset in other areas like investment management fees .
CONGRATULATIONS ! IT ’ S A RETIREMENT PLAN !
SO , YOU ’ VE SOLD YOUR BUSINESS AND NOW YOU ’ RE ASKING THE QUESTION “ WHAT HAPPENS TO THE RETIREMENT PLAN ?” You are not alone . In the world of mergers and acquisitions , it is not uncommon for retirement plans to be overlooked in the process . The options available depend upon the type of transaction taking place and the timing , that is — has the transaction already occurred , or is it set for a prospective date ? The transaction that takes place is typically classified under one of two categories , an asset sale or a stock sale . We will explore each of these transaction types along with the options available under each below .
ASSET SALE
In an asset sale , the assets of an entity are purchased by another company . Some examples of assets include equipment , licenses , goodwill , customer lists , and inventory . While the seller ’ s assets have been purchased , their entity will continue to exist until properly closed down . The buyer generally does not acquire the liabilities of the seller in this scenario . This includes the retirement plan . Once the sale takes place , the seller can terminate the retirement plan and distribute all assets , or they can continue
BENEFIT INSIGHTS SPRING 2021