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Retirement Plan Administration Essentials: Installation, Management, and Investment Guidelines

This lecture covers the administration of retirement plans, including plan installation, investment considerations, plan termination, and key issues related to the Pension Benefit Guaranty Corporation. It also discusses plan administration, investment policies, and the process of terminating a plan. The lecture delves into the responsibilities of plan administrators, reporting and disclosure requirements, and investment strategies, emphasizing the importance of fiduciary duties and compliance with regulations. Additionally, it addresses the termination procedures, benefits insured by the PBGC, and the consequences and implications of plan termination for both employers and employees.

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Retirement Plan Administration Essentials: Installation, Management, and Investment Guidelines

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Presentation Transcript

  1. Lecture 28Administration of Retirement Plans and Related Issues • Plan Installation • Plan Administration • Investment Issues • Plan Termination • Pension Benefit Guaranty Corporation

  2. Plan Installation • Adoption of the plan • Plan year • Advance determination letters • Master, prototype and pattern plans • Checklist for plan installation

  3. Plan Administration • Plans exempt from ERISA requirements • Governmental plans • Church plans • Plans limited to workers’ comp, unemployment insurance and disability insurance laws • Other exceptions • Plan administrator • Claims procedure • Tax withholding

  4. Plan Administration - (cont.) • Reporting and disclosure • Summary Plan Description (SPD) • Annual Report (Form 5500 Series) • Report on Termination, Merger or Other Changes • Individual Benefit Statement • Underfunded Plan Reports

  5. Investment Issues • Fiduciary requirements • Solely in the interest of participants • Exclusive purpose of providing benefits • Prudent person • Diversify investments • Prohibited transactions • Party-in-interest • Penalties • Unrelated business income

  6. Investment Issues - (cont.) • Investment policy • Growth oriented strategies • Risk • Social effects • Social investing

  7. Plan Termination • When should a plan be terminated? • Asset-reversion terminations • Penalty of 50% of reversion unless: • Replacement plan • Pro-rata benefit increases of 20% of reversion • Bankruptcy of employer • Consequences of termination • Business necessity • Treated as nonqualified plan • Vesting of 100%

  8. Pension Benefit Guaranty Corporation • Plans covered • Benefits insured • Vested pension benefits • Limited to $750/month (indexed - $2761.36 in 1997) • PBGC funding and premiums • Plan termination procedures • Reportable events • Allocation of plan assets • Voluntary plan termination • Contingent liability of employer (30% of net worth) • Multiemployer plans • Withdrawal liability

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