Lecture 28 Administration of Retirement Plans and Related Issues

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