Lecture 28Administration of Retirement

Plans and Related Issues• Plan Installation

• Plan Administration

• Investment Issues

• Plan Termination

• Pension Benefit Guaranty Corporation

Plan Installation

• Adoption of the plan

• Plan year

• Advance determination letters

• Master, prototype and pattern plans

• Checklist for plan installation

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

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

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

Investment Issues - (cont.)

• Investment policy– Growth oriented strategies– Risk– Social effects– Social investing

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%

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