PD08: Best Practices to Protect Against ERISA Lawsuits

One of the chief concerns for plan sponsors and providers, besides getting their participants to a successful retirement, is making sure they are not sued for their attempts.
By PS

Thom Shumosic, President of Rockwood Financial Group, Keith Gredys, CEO & COO at Kidder Benefit Consultants Inc., and Nancy Ross, Partner at McDermott Will & Emery, discussed various techniques and practices to try to ensure that clients were protected against potential lawsuits. They made their comments at a discussion panel at PLANSPONSOR ‘s recent Plan Designs Conference in Chicago.


align=”center”> The Panel Audio File


Shumosic outlined his firm’s philosophy, saying it focuses on education and takes a “no participant left behind” approach.

By meeting with participants at least four times a year, spending time with them and being patient when explaining the details of their plan processes, their clients’ participants learned to trust them, and were more willing to stay with them for life, rather than moving on from their plan after a few years, he said.

Shumosic believes that, by filtering through any misinformation, their participants can make more informed decisions without feeling overwhelmed by the plan management process.

Gredys advocated going back to the plan's engagement agreement and making sure the sponsor understands the scope of services being provided.

He suggested asking questions to find out if the providers are fiduciaries, what the fees are and how they are allocated, and taking note of who is responsible for each aspect of plan administration. He also believes that recordkeeping is vital as is making sure that the plan document is always aligned with the actual plan practices; some plans have been known to make amendments to one without finalizing it in the other.

"Who is going to be responsible for the updates, the amendments, the board resolutions?" Gredys asked.

Required amendments must be made in a timely manner-or the plan risks fines from the IRS or questioning from their participants-and all plan operations must be based on, and made official, in the plan's document.

Details of what is included in plan administration must be recorded, such as whether bonuses are considered and what constitutes a bonus. Definitions of compensation must be clarified and work according to the plan's specifications.

Every few years the plan documents must be reviewed and all major changes must be codified. Gredys stressed the importance of attention to detail, saying excessive communication and recordkeeping would be safer and more prudent than a more lackadaisical attitude.

Ross agreed with Shumosic and Gredys about the importance of education and recordkeeping, opting to focus on communication as a point of interest. While Gredys listed the "Three Cs of Communication," saying the Client, Consultant and CPA should always be considered when decisions and changes are made, Ross offered her own "Key Buzzwords" as well, summarizing the previous points under the continuing need to "Communicate and Educate, it's all about Process."

She supported e-mail notices to keep participants informed on a regular basis. "Communications to the plan participants," she said, "there is nothing more central . . .That is where they get their information."

Plan sponsors will also be relieved to know that when they make information available in this way, "The courts are clear that even if they (participants) do not read those communications, they are still held accountable for what's held inside them."

-Sara Kelly

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