Increased Focus Needed on Administrative Compliance

November 8, 2013 ( – Traditionally, plan sponsors and advisers have focused on fiduciary responsibilities related to the selection and monitoring of investments.

But, regulators have been stepping up efforts to ensure plans are administered correctly (see “DOL Sues Firm for Plan Administration Failures”).  The Department of Labor (DOL) has added more than 1,000 employees since 2011, many in enforcement, Chris Augelli, vice president of product marketing and business development for ADP Retirement Services, told PLANSPONSOR. He added that in 2012, $1.27 billion was collected in plan restorations, collective actions and fines, and the DOL estimates as much as 75% of plans they are auditing are out of compliance. “This is fertile ground for administrative audits,” Augelli says.

But, the proper administration of plans is not just about protecting a company and individuals from liability, but also about doing what is right for employees, Augelli adds. “It is about making sure the plan is accurately administered so employees can have confidence in the accuracy of their accounts.”

Augelli offers administration tasks on which plan sponsors should be focused:

  • Administering the plan in compliance with provisions of plan document. For example, plan sponsors should make sure eligibility is properly calculated, compensation is properly calculated and match contributions are properly recorded.
  • Timeliness of investing participant contributions. “It is all too easy to have this process delayed,” Augelli warns, “but the government lays out strict requirements for the timing of investing contributions.” Augelli notes ADP’s SMARTSync 401(k) integration solution takes this one off the table for plan sponsors. “With SMARTSync, payroll runs and information is instantaneously sent to the recordkeeper. At the same time, funds are automatically sent via ACH [Automated Clearing House] to be invested. It precludes the chance that plan sponsors will be late investing funds,” he says.
  • Ensuring loans are properly set up, and loan repayments properly calculated, timely collected and applied to participants’ accounts. This also includes making sure once a loan is paid off that loan repayments stop. Augelli says he’s often seen situations in which once a loan is satisfied, no action is taken to stop loan repayments. This means non-qualified money is going into the plan, which requires corrections, he notes. Again, with SMARTSync, when a loan is satisfied, the program automatically tells the payroll system to turn off loan repayment.
  • Implementing participant-directed changes. Investment election and deferral rate changes can be missed when they pass from one entity to another. If the change isn’t made, the plan sponsor will have to retroactively correct, and may pay a fine, Augelli notes. With the SMARTSync solution, information is automatically sent to the payroll system, data is properly recorded, and when the next payroll runs, the proper amount of deferrals are placed into the proper funds, he says. The automatic recording of the transaction also creates an audit trail showing when the change was requested and when it was enacted. No manual oversight or intervention from the plan sponsor is needed.
  • Maintaining accurate census data. This is important since it feeds plan nondiscrimination testing and government filings, Augelli points out.
  • Furnishing all appropriate notices to participants.
  • Maintaining a fiduciary bond for everyone who has any control over plan assets. This is an issues frequently being ignored, according to Augelli.


So, there is a long laundry list of items that need to be taken care of on a day-to-day basis—a huge amount of ongoing responsibility to make sure the plan is being properly administered, Augelli says. He suggests plan sponsors look at administrative responsibility in the same fashion as investment responsibility and follow the same process—have a process, audit the process periodically and document adherence to that process.

He adds, plan sponsors should “look for service providers that can give them a hand, make their lives easier and improve their compliance.”