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QuestionAnswer
Can a church plan elect to be subject to ERISA? Yes.
If a non-governmental 403b plan seeks to avoid ERISA through a safe harbor, could the sponsor hire a third party to administer a loan component of the plan without becoming subject to ERISA? No - if ER can't do it, then can't hire a 3rd party to do the activity is not allowed to do an activity - would cause the employer to exceed the limited involvement “safe harbor,” and thus become subject to ERISA
What is the minimum number of providers a 403b sponsor seeking exemption under ERISA should have in the plan? The plan must offer a choice of more than one 403b contractor (financial representative). Unless plan can demonstrate that the cost of offering multiple contractors or multiple products would cause the employer to stop contributions to the plan.
What is the minimum number of investment products a sponsor seeking exemption under ERISA should have in the plan? >1 403(b) contractor (financial representative) and>1 invest product. Except if exchanges permited or justified by costs to limit the vendors for plan with open architechture custodial acct platform or multi- fund family annuity contract.
If a 403b plan includes a provision to cease forwarding salary deferrals to a non-compliance vendor, would that cause the employer to loose the ERISA exemption for limited involvement? No
True/False: 403bs for EE deferrals only in which an er is limited to certain activities is not a "pension plan" True: if the plan meets the limited activities rqmt it is not subject to ERISA because it is exempted from the definition of "pension plan"
Do Negative Elections Cause a 403(b) Plan to Become Subject to ERISA? this plan feature would probably cause a nongovernmental or non-church 403(b) plan to become subject to ERISA.
May an employer contribute to a 403b plan without becoming subject to ERISA? No. The first part of the avoiding ERISA by exempting the plan from "pension plan" definition restricts the funding source to salary reduction contributions only. The other part restricts ER involvement to limited activities.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Must EE participation be voluntary? Yes - this is a requirement under the "limited involvement" test for ERISA exemption.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". What rights may S enforce under P? None. All rights under the 403(b) arrangement must be enforceable solely by the employee, his or her beneficiary, or by an authorized representative of the employee or beneficiary.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S request product info and provides it to the Ees. S will not fail the limited involvement test by allowing vendors to publicize their products to EEs, getting vendor and product info, and summarizing the info for Ees.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S remit salary reductions or must Ees do this themselves? S can collect & remit deferrals and maintain such records of payment
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S hold group contracts for P? Yes - this falls within "limited involvement"
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S limit the number of products in P? Yes, limiting the products available to employees to a number and selection which is designed to offer employees a “reasonable” choice in light of all relevant circumstances does not cause S to fail "limited involvement".
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". May S recoup its reasonable costs incurred by remitting payroll deductions? Yes as long as S receives no direct/indirect payments other than for reasonable expenses actually incurred by the S in the performance of its duties pursuant to the salary reduction agreements.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S move EE account to a different vendor due to a vendor becoming excluded under the plan? S may NOT move EE accounts/contracts from one provider to another without losing the limited involvement safe harbor exemption. Only an employee may move the employee’s accounts/contracts.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S stop remitting deferrals to a vendor? Yes.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S remove a provider under P? Yes.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S adopt a written plan? an employer may adopt a written plan document without automatically losing the exemption even though maintaining a written plan is not on the list of permitted activities in Reg. 25 10.3-2
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S make loans available? Only if the vendor (contract issuer or custodian) is responsible for making the discretionary determinations necessary for administering such features.
Sponsor S wants its 403b plan P to avoid ERISA through "limited involvement" by exempting itself from the definition of "pension plan". Can S make hardships available? S may make optional plan features, such as loans and hardship distributions available only if the vendor is responsible for making the discretionary determinations necessary for administering such features.
of "pension plan". May a sponsor exclude a vendor from the plan if not willing to take on responsibility for discretionary determinations under terms of the contract and plan. S may refuse to exclude V if unwilling /unable to make discretionary determinations under the terms of contract and the P document if such action is intended to reduce S's costs in P or could cause P to lose its ERISA exemption
Are public schools and exempt from ERISA? Yes.
Are churches, synagogues and mosques exempt from ERISA? Yes unless the church elects to become subject to ERISA.
What code section describes religious organizations exempt from ERISA? 414(e)
May governmental sponsors of 403b plans elect to be covered under ERISA? Governmental employers may NOT elect to be covered by ERISA as the statute expressly excludes them from coverage.
To be excluded from 403b plan assets for ERISA reporting, a contract must have been issued to the EE or former EE before what date 39814
To be excluded from 403b plan assets for ERISA reporting, the ER must have stopped remitting contributions to the contract after what date? Dec 31 2008
True/False To be excluded from 403b plan assets for ERISA reporting, rights and benefits under the contract/account must be legally enforceable against the insurer or custodian only by the individual EE without any involvement by the ER. True.
Would ER cause 403b plan to fail the "limited involvement" requirement for ERISA exemption if S receives a better rate on health insurance premiums because it gives an insurer access to Ees for P contributions. Is this OK? Probably - ER must receive no direct or indirect payments of cash or other consideration other than reasonable expenses actually incurred by the employer in the performance of its duties pursuant to the salary reduction agreements.
True/False. A plan subject to ERISA must cover a broad based group of employees. True.
True/False: A plan subject to ERISA must be fully funded and assets must be protected. True - it must be fully funded and plan assets must be set aside in a protected account, such as a trust, annuity contract or custodial account.
Would ER cause 403b plan to fail the "limited involvement" requirement for ERISA exemption if it determines transfer or exchange rights Yes. But the vendor could do this.
Would ER cause 403b plan to fail the "limited involvement" requirement for ERISA exemption if it determines if an order is a QDRO. Yes. But a vendor could do this.
What precautions would a governmental 403b plan need to take before implementing a plan with negative election provisions. review state law b-- most states do not permit governmental employers to withhold amounts from an employee’s paycheck without prior written consent.”
Can an account be excluded under the ER's 403b plan for IRS purposes? ERISA purposes? Ees 403(b) contract is with a “de-selected vendor” with contributions after 12/31/2004, but that vendor accepted no contributions after 12/31/2008. Not for IRS purpose but may be excluded under ERISA. The “de-selected” vendor contracts are included under the plan under the final regulations, but may be excluded as plan assets under FAB 2009-02 for Title I purposes.
Do state fiduciary rules apply to ERISA plans"? No, because of federal preemption, state fiduciary rules do not apply to ERISA plans.
How does the ERISA fiduciary standard compare to state standards in terms or expertise? ERISA uses a "prudent expert standard". That is, fids will be measured against the specialized skill and experience of experts in the relevant field. Many states use "prudent person standard" with no expectation of expertise or exceptional skill.
How does the ERISA fiduciary standard compare to state standards in terms or expertise? ERISA requires plans to diversify,’ assets unless it is clearly prudent not to do so. State law generally has no such diversification requirement.
Describe ERISA's "exclusive best interest rule" applicable to fiduciaries. all fiduciaries must act solely in the interest of plan participants and beneficiaries (“exclusive best interest rule”);
Describe ERISA's “prudent expert rule” applicable to fiduciaries. fid. must exercise the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would the conduct of an enterprise of a like character and with like aims (“prudent expert rule”);
Describe ERISA's “diversification rule” applicable to fiduciaries. fiduciaries must diversify the investment of assets to minimize the risk of loss unless under the circumstances, it is clearly prudent not to do so (“diversification rule”)
Describe ERISA's “conformity rule” applicable to fiduciaries. fiduciaries must act in accordance with the plan’s documents and other instruments governing the plan unless such materials are inconsistent with ERISA (“conformity rule”).
What Is An “Eligible Investment Advice Arrangement”? comp not based on invest options selected by plan/ee or; uses a computer model; Is approved by an independent fid; and comp or the computer model, certain invest performance stats and other rqd info would have to be disclosed.
What is the "named fiduciary"? The “named fiduciary” is any person or entity specifically identified as such in the plan document and SPD.
Must an ERISA plan have at least one named fiduciary? ERISA requires that each plan have at least one “named fiduciary.”
What is the purpose of the named fiducuciary? to identify the party responsible for the plan operation to participants and other parties dealing with the plan. It can also be advantageous to other fiduciaries because it focuses liability for general violations on that named fiduciary.”
Who can be a "fiduciary advisor" RIA, a bank in some cases, insurance co, broker/dealer, affiliate of any of these, EE, agent or registered representative of any of these, or the entity/person who developed the computer model.
When may a bank or similar financial institution be a fiduciary advisor? only if the services are provided through a trust department which is subject to periodic review by federal or state banking authorities,
RIA or broker/dealers any be a fiduciary advisor if registered under what act? under the 1934 Securities Act,
Generally, all of the following parties are fiduciaries under ERISA because of their status: the Plan sponsor; . the trustee: . the board of directors of plan sponsor: the plan administrator named in the plan document: . the benefit committees (including investment committees); and the investment managers.
Under what circumstances might a fiduciary transfer fiduciary status to another person? a person who is a fiduciary cannot transfer that status to another person.
Can an employer sponsoring a 403(b) plan transfer the employer’s fiduciary status as a fiduciary to a vendor or third party administrator where the vendor agrees to assume fiduciary liability? No. . Even if the vendor or TPA agreed to assume fiduciary liability, the employer would still be a fiduciary because of the employer’s status and actions.
Is a person providing investment advice for a fee a fiduciary? Yes - whether direct or indirect, you are a fiduciary. This includes commissions, fees, retainers, sales- charges, transaction charges, etc.
How is the definition of investment advice changed under the proposed regulations, now includes routine val of investments, advice /recommendations for invest mgmt (in addition to acquiring & disposing of invest.) advice (regular or one time and even if not the primary basis for invest decision)
As opposed to proposed regs, when would someone providing investment advice become a fiduciary? the advice had to be provided on a regular basis and had to be the primary basis for the investment decision.
True/False All reps that sell investment products to Ees are fiduciaries. False. If through an arrangement where comp is the same regardless of invest option or where choices are based on computer models may not become a fiduciary.
Is a financial representative who provides customized investment advice to the plan sponsor, a plan fiduciary, a plan participant or a plan beneficiary a fiduciary. it is very likely that the financial representative would be considered to be a fiduciary IF the proposed DOL regulations are finalized in their current form.
A participant gets information from a financial representative about a product which, if purchased by the participant, would result in compensation to the representative, is the rep a fiduciary? under the proposed regulations, it is likely t considered to be providing advice for a fee unless through an arrangement where comp is the same regardless of invest option or where choices are based on computer models.
I Am A Fiduciary, Am I Responsible For All Plan Activities? No. Under ERISA, you are generally a fiduciary only with respect to those areas in which you exercise (or have the right to exercise) your fiduciary responsibilities or control.
if you are a fiduciary because you provide investment advice for a fee, will you be responsible for other plan activities? you will generally be responsible only for those actions and activities that result from your investment advisory services. You will not be a fiduciary for plan administration activities.
When may a fiduciary be held responsible for a co-fiduciary’s breach of duty? knowingly participates in or conceals another fiduciary’s breach; enables another fiduciary to breach fiduciary duties by failing to comply with the general fiduciary standards, or
if participants do not exercise their rights to direct the investment of their accounts, would a fiduciaries still be responsible for the investment returns on such accounts. Yes except through safe harbor investment
An investment professional selling mutual funds would always be a __?__ Party in interest
Is a person following rules to determine eligibility and participation a fiduciary? Determining eligibility by following rules does not make you a fiduciary.
Does calculating compensation and service periods for benefit purposes make a person a fiduciary? No.
Does preparing materials for employee communication make a person a fiduciary? No.
Does maintaining service and employment records make a person a fiduciary? No.
Does calculating benefits payable under the plan make a person a fiduciary? No.
Does processing claims make a person a fiduciary? No.
Does collecting contributions and investing them as specified by :he plan make a person a fiduciary? No.
Does making recommendations on plan administration make a person a fiduciary? No.
Does communicating the plan to participants and preparing benefit reports for participants make a person a fiduciary? No.
Does appointing other fiduciaries make you a fiduciary? Yes.
Does delegating responsibilities make you a fiduciary? It can.
Does selecting investment products or options make you a fiduciary? Yes.
Does buying and selling plan assets make you a fiduciary? Yes, if under discretionary terms.
Does interpreting plan provisions make you a fiduciary? Yes.
Does determining QDRO validity make you a fiduciary? Yes.
Does determining hardship request validity make you a fiduciary? Yes if any part of that is discretionary.
Does evaluating the performance of other fiduciaries or service providers make you a fiduciary? Yes.
The 403b ER has selects 20 plan investments and hires a sales rep to enroll Ees. The rep is paid a flat fee by the ER to enroll/educate the Ees on the features of the plan and may also receive comp from some of the products. Is the rep a fiduciary? Since the rep is educating/advising participants, is not a fiduciary. It is ok to receive a fee for educating plan participants. It is also permissible to receive a fee for enrolling participants, if such service is reasonable and necessary.
Is it still investment adviceiIf a person can demonstrate that he gave advice to someone who knew that his interest were adverse to the plan and that he did not intent to seek impartial advice No.
When would A preparing general reports that reflect the values of plan investments solely for the purpose of compliance with reporting and disclosure requirements be considered to be providing advice in this task? Only if it involves assets for which there is no generally recognized market and serves as a basis for which distributions may be made
True/False A person that provides investment education information and materials to individual account participants under existing DOL regulations permitting asset allocation models and interactive materials would be treated as "providing advice" False.
Is representing an investment product and marketing the product to a plan fiduciary that has the authority to select the investment options to be available to participants under the plan considered "giving advice" Not if the marketer discloses in writing to the plan fiduciary that the person is not trying to provide impartial investment advice
When would providing a default investment relieve a fiduciary for investment performance of DC plan? If the plan fiduciary invests the participants contributions in a QDIA, the fiduciaries responsibility be reduced (not eliminated).
What are the 3 types of investments that qualify as QDIAs, Life cycle or targeted retirement date funds, Balanced funds, and/or Professionally managed accounts
When would a money market fund be able to be used as a QDIA? Never - nor could stable value funds, fixed income funds, government securities funds and guaranteed income accounts be considered to be QDIAs.
What are the diversification requirements for a QDIA? Each must be diversified so as to minimize the risk of large losses and must either be managed by an investment manager or an investment company registered under the Investment Company Act of 1940.
Under what conditions may a QDIA impose financial penalties The QDIA cannot impose penalties or otherwise restrict the ability of a participant or beneficiary to transfer the investment from the qualified default alternative to any other investment available under the plan.
An initial QDIA notice must be provided to all participants and thereafter at least how often? 30 days before the beginning of each plan year.
What must be included in a QDIA notice? A description of the assets to be invested in the QDIA, the investment objective of the QDIA and an explanation of the participant’s rights to direct investments out of the QDIA.
What other information must be distributed besides the QDIA notice to provide investment performance relief to the fiduciary? The plan must distribute copies of all materials received by the plan administrator from the default investment product provider to each participant, including prospectuses, annual reports, proxy materials, etc.
In order to qualify for ERISA §404(c) relief, a plan must provide a minimum of how many investments? at least three investment options, each with different risk and return characteristics
In order to qualify for ERISA §404(c) relief, how often must a plan must provide participants an option to change their investment choices? at least once per quarter and more frequently if more volatile investments are offered as part of the
Must participants be informed if the plan intends to to qualify for ERISA §404(c) relief Yes - through a statement that the plan is intended to qualify as a Section 404(c) plan with an the participant’s investment instructions;
Can a 403(b) plan make distributions to participants due to the termination of the 403(b) plan? No.
ERISA includes several “class exemptions” which specifically exclude all relationships and activities that meet the requirements for such class exemptions from the PT rules. List some of these. insurance agents/brokers and pension consultants, certain delinquent contributions, construction loans, furnishing office space, admin services, and goods involving multiple employer plans; interest free loans; in-house invest company plans
hen can a bundled service provider receive fees from a mutual fund to cover costs of administrative fees without incurring a prohibited transaction? if the fiduciary did not use any discretionary authority to cause the plan to invest in a particular fund under a particular product,
if an investment advisor was a fiduciary and it received fees from related service providers, what must be done to avoid incurring a prohibited transaction? The advisor can eliminate any self-interest motive by reducing the fees otherwise owed by the plan by the same amount as the fiduciary received from the related service providers.
May a fiduciary be excused from what would otherwise be a prohibited transaction if it resulted from an honest mistake? No. There is no exception to the Prohibited Transactions rules for good intentions or honest mistakes.
What penalties may result to a fiduciary for a prohibited transaction? civil and criminal fines may apply and fiduciaries may be Personally responsible for losses experienced by the plan.
Is a sale or exchange of any property between the plan and a “party-in-interest a prohibited transaction? Yes
Is a loan or extension of credit between a plan and a “party-in-interest,” a prohibited transaction? Yes
Is furnishing of goods, services or facilities between a plan and a “party-in- interest;” a prohibited transaction? Yes
Is the transfer of any plan asset to, or use by a “party-in-interest." a prohibited transaction? Yes
Is the dealing with plan assets in the fiduciary's own interest or for his or her own account, a prohibited transaction? Yes
Is a fiduciary acting in any plan transaction on behalf of anyone with interests adverse to the plan, participants or beneficiaries a prohibited transaction? Yes.
Is a fiduciary receiving compensation for his or her personal account from any party dealing with the plan a prohibited transaction? Yes.
True/False: insurance can be purchased to cover losses as a result of a prohibited transaction. TRUE
If I am not a Fiduciary, Can I be Responsible for a PT Violation? Yes, if you are a party in interest.
True/False: Parties in in interest can be held responsible for money damages for a PT violation False: due to a Supreme Court case, it is now clear that money damages are not available from non-flduciaries.
What are the consequences to an accountant audits the plan as part of an internal audit of the employer and becomes aware of a problem with the plan, but does not disclose the problem. the accountant may be responsible for a PT if the written report does not clearly disclose the plan problem. If the accountant attempts to hide the problem or is silent, he or she may become liable for a PT even though he or she is not a fiduciary.
A fiduciary is involved in a PT which results in loss of plan assets. Whose assets are involved in restoring the plan? Under ER1SA, each fid. has personal liability to make good losses resulting from breach and to restore profits that the fid has made from the plan. Personal assets, not just business assets, can be used to restore losses to an ERISA plan.
In addition to returning losses of the plan due to a PT, may the fiduciary be forced to return profits made to the plan? Yes and in addition to this relief, the DOL may impose a penalty of 20% of the amount payable to the plan.
What is the penalty rate that may be assessed to a fiduciary due to a PT 20% of the amount of profits payable to the plan.
What discretion does the DOL have in assessing a penalty due to PT on amounts payable to the plan. This penalty can be waived if the fiduciary acted in good faith and would not be able to pay the penalty without severe financial hardship.
What remedies are available to participants to regain losses from a fiduciary due to a PT? Civil suits by participants and beneficiaries can also be brought on and the DOL can also sue for any appropriate equitable relief such as injunctions, restitution or disgorgement.
What penalties may the IRS impose for prohibited transactions in a 403b plan? Although the IRS also imposes penalties for PTs, it appears that 403(b) plans are not subject to these penalties because they are not plans that qualify under IRC §401.
What are two ways that a fiduciary can be insulated from personal financial loss resulting from a PT? Liability insurance can be purchased for the ERISA plan and fiduciaries. In addition, the plan sponsor can indemnify fiduciaries for their fiduciary liabilities.
How long to penalties due to a prohibited transaction remain in place? Penalties remain in place each year until the PT is corrected.
What is meant by "undo" the prohibited transaction? This means to place the plan in a financial position no worse than the position it would have been in had the party-in-interest not entered into the PT.
If the fiduciary "undoes" the PT, may the fiduciary avoid penalty? No -- the correction through undoing the PT is in addition to the penalty.
When are CSP fee disclosures due to plan fiduciaries? reasonably in advance of the date the service contract is entered into, extended or renewed.
When are changes to fee disclosure details due to plan fiduciaries? Subsequent changes to the information should be made as soon as practicable, but no later than 60 days from the date the service provider has knowledge of the change.
When are changes in plan related information due to participants? at least 30 but not more than 90 days before the effective date of the change (except for unforeseeable emergencies).
Is electronic delivery of fee disclosures acceptable for participant fee disclosures? only for participants with regular access to e-mail.
When are initial fee disclosures due to new participants? on or before the date on which a participant or beneficiary can FIRST direct investments under the plan and then annually thereafter. For new participants, the information should be part of the materials that are provided to employees.
What investment returns must be provided to participants as part of disclosures? 1, 5 and 10 year periods and fixed return data (shorter periods acceptable if life of investment is less than required reporting period)
When are participant annual fee disclosures due to a calendar plan year? May 31 2012. 60 days after the effective date for 408b2 disclosures
For calendar plan year of 2014 of a new plan, when are the annual disclosures due to participants? 60 days after the effective date so March 1.
When are 408b2 disclosures (csp) due? April 1 2012
When are quarterly fee disclosures due to participants in a calendar year plan? August 14, 2012. 45th day after the second quarter in which initial disclosure is required.
For calendar plan year beginning 1/1/2013, when are quarterly fee disclosure due? May 15 (45 days after quarter)
Fee disclosures apply to plan years beginning after what date? Nov 1 2011.
CSPs are required to provide info to plan fiduciaries for certain categories of service if they expect to receive at least how much in compensation? 1000
Providers are required to provide specified information to plan fiduciaries if they expect to receive at least $1,000 by providing specific services. Do these services include fiduciary services? RIA services? Yes.
Providers are required to provide specified information to plan fiduciaries if they expect to receive at least $1,000 in direct compensation by providing specific services. When would these include recordkeeping services? recordkeeping or brokerage services provided directly to participant directed defined contribution plans if one or more investment options is an “open architecture” platform'
Providers are required to provide specified information to plan fiduciaries if they expect to receive at least $1,000 in direct compensation by providing specific services. When would these include brokerage services? recordkeeping or brokerage services provided directly to participant directed defined contribution plans if one or more investment options is an “open architecture” platform'
When would a CSP disclose compensation received for plans services for accounting? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
When would a CSP disclose compensation received for plans services for auditing services? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
When would a CSP disclose compensation received for plans services for actuarial services? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
When would a CSP disclose compensation received for plans services for appraisal banking services? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
When would a CSP disclose compensation received for plans services for consulting services? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
When would a CSP disclose compensation received for plans services for legal services? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
When would a CSP disclose compensation received for plans services for recordkeeping not in combination with a platform of investments? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
When would a CSP disclose compensation received for plans services for third party administration not in combination with a platform of investments? If the CSP expects to receive 1000 or more in indirect (not direct) compensation.
Does erisa require that plans have a funding policy? Yes. ERISA requires that every plan have a procedure for establishing and implementing a funding policy.
What does a funding policy address? the level and timing of contributions necessary to fund benefits throughout the life of the plan, which helps to determine the long and short term financial needs of the plan.
What is an investment policy? A plan's investment policy statement (IPS) is narrower in scope than its funding policy and details the investment objectives of the plan's assets.
Does ERISA require plans to have a written investment policy statement? No.
What is included in an investment policy statement? Invest guidelines&restrictions, risk&return objectives, policy and processes including communication protocol, asset allocations, investment mgr monitory criteria including use of benchmarks and invest goals
Investment performance should not be the only factor that is monitored. Other things that should be monitored include: Report review, investment mgr meetings, brokerage practices, communication procedures, fee computations, investment performance
__?__ is the cumulative annualized return or compound annual return of a portfolio. It looks backwards measuring return for a historical period. Geometric mean return
__?__ is the avg return earned by all of the dollars invested in a portfolio and is dependent on the timing of cash flows Dollar weighted return
__?__ is calculated by equally weighting the dollar weighted returns of a specified number of periods Time weighted return or internal rate of return (IRR)
__?__ minimizes the impact of timing of cash flows compared to the dollar weighted return. Time weighted return or internal rate of return (IRR)
List three ways investment return can be measured A geometric mean return, The dollar weighted return, and The time weighted return or internal rate of return (IRR)
What are two types of benchmarks that may be used to measure the investment manager's performance? The Mgr's performance can be evaluated against a broadbased single asset class or customized composite Bnchmk.
What fiduciary responsibility with respect to investments is retained by the plan sponsor when an investment manager is used? The ER has responsibilities of setting explicit invest objectives, long range goals for each particular fund and managing their mgrs to ensure their policies are being followed. The invest mgr is responsible for the specific investment class.
In years before 1998, only amounts less than $3,500 could have been distributed to the employee without consent. Compare the prior rule to the current one. involuntary distribution on or after March 28, 2005, the plan administrator must roll any distribution that is greater than $1,000 and no more than $5,000 directly into an IRA.
Why might mandatory rollovers and distributions of accounts less than $5000 be a problem in 403b plans? participant’s accounts may include balances that are not known to the TPA with a de-selected vendor or may have transferred/exchanged contracts occurring on or after 9/24/07 that did not qualify for “grandfather” status.
403b plans often include grandfathered accounts which are unaccounted for. When would mandatory rollovers and distributions of 403b accounts less than 5K be a safe plan provision. Generally only plans that are and have always been held exclusively in group annuity contracts will have reliable historical account data on all participant accounts.
What is the mandatory rollover safe harbor procedure for accounts less than 5K? made to a “qualifying IRA provider,” under written agreement between the ER and the vendor that includes specific rqmts, and pt receives a notice of the rollover rqmts, invest products in the IRA and an explanation of the expenses of the IRA.
Generally, all years of service with the employer are counted when determining a participant’s vesting credits. However, ERISA does permit a plan to disregard certain service such as what? such as service before an employee was 18 and service for years in which the employee failed to make a required contribution. However, these types of exclusions are very rare in 403(b) plans.
What is the required annuity distribution rules under ERISA? If EE is single, payout is a life annuity. If the employee is married, the payout must be QJSA with 50% survivor annuity benefit. EE may be able to waive this form but if married, consent is required also by spouse.
ER1SA provides an exception to the required annuity distribution rule for plans that meet what requirements? individual acct plan, provides surviving spouse is the mandatory death beneficiary unless the spouse consents to a different beneficiary, The participant does not elect to receive a life annuity or QJSA and
What are the minimum vesting schedules available to an ERISA plan? At least 20% after 2 years of service and 20% for each year thereafter resulting in
How did EGTRRA change the required distribution options in 403b plans? Plans can amend to eliminate optional forms of distr. SO long as a single sum option is available to EEs and the doc permit transfers between 403(b) plans w/out regard to the distr options in the receiving plan
How did the Job Creation and Worker Assistance Act of 2002 make the 415 limit more manageable in 403b plans? Before it was necessary to count “non-vested” amounts as contributions in the year vested for purposes of the IRC §415(c) limit. Now, the non-vested contributions will be counted as contributions in the year they are made.
The exclusion allowance for 403b plans was repealed by what act? EGTRRA
Under ERISA, a participant’s right to his account balance must be non-forfeitable (“fully vested”) upon attaining normal retirement age. IRS has generally taken the position that the retirement age cannot be greater than what age? age 65. Since there has been pension legislation (for funding purposes) that redefines normal retirement age as the social security retirement age, it is possible that a later age may be acceptable.
Under ERISA, no plan may require that an employee complete more than one (1) year of service or attain age 21 in order to participate in the plan. What is the exception for educational organizations? Schools, colleges and universities may use age 26, if the plan benefits are immediately 100% vested.
Under ERISA, no plan may require that an employee complete more than one (1) year of service or attain age 21 in order to participate in the plan. What is the exception for plans providing immediate full vesting and how does it work in a 403b plan? the plan may impose a two (2) year elig period. No max age for participation . However, IRC §403(b) requires immediate participation for EE deferrals so wait period /age rqmt for participation only applies to eligibility for er contributions.
Under ERISA, an ER cannot exclude "part time" Ees except by what definition? An employer cannot exclude “part time” employees, unless such employees are defined as employees who are not credited with at least 1,000 hours of service in a year.
Once a person satisfies the eligibility requirements of the ERISA plan, he or she must begin to participate in the plan no later than what date? the first day of the next plan year, or a date six months after he or she has satisfied the eligibility requirements, whichever occurs earlier.
How is a “year of service” for eligibility purposes defined by ERISA? a twelve (12) month period (the “eligibility period”) in which the employee has been credited with at least 1,000 hours of service.
Under ERISA, can an employer define a year of service as more than 1,000 hours in a twelve (12) month period, or a requirement that the employee be “full time.” No.
Under ERISA, may the hours for purposes of a year of service be prorated to require a weekly or monthly work minimum, such as 35 hours per week or 100 hours per month. No.
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