selecting an open mep employers due diligence checklist - Fi360

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19 Provision of Eligibility data such asdates of hire, birth dates, and hours ofservice to the provider.20 Employers have responsibility totransfer salary deferral amounts takefrom pay as soon as those amounts canreasonably be segregated from planassets.Plan Investments21 Responsibility for maintenance of planinvestment policy statement (IPS)22 Any responsibility in employer forselecting plan’s investment line-up?Participant Enrollment,Education/Investment Advice23 Who is responsible for enrolling andeducating participants? Is investmentadvice provided?Reporting to the Employer bythe ProviderThe employer must timely provide accurate information to theMEP provider. This is a responsibility the adopting employerwill not escape under any arrangement.The failure to satisfy this requirement can result in a prohibitedtransaction and the imposition of excise taxes on the employer.Does the provider maintain an IPS? What does it say?Depending on the arrangement, the employer could have someexposure to liability for plan investments.Is it the provider, a broker or someone else? How frequently willthere be group meetings? What is the level of commitment?Although adopting a MEP relieves employers of operationalresponsibilities, employers have oversight and monitoringresponsibilities. Thus, they must have reports from the providerregarding plan operations.24 Annual Reports and Other Reports Annually the provider should provide to the employer informationrelating to (i) plan investments (ii) fees; (iii) plan amendmentsmade during the year; (iv) any significant problems with planservice providers or in the administration of the plan (v) anysignificant issues identified by the plan’s auditor and (vi)participation and plan design improvement reports. What aboutperiodic reports as required?Getting Out25 Does the MEP plan document reservethe participating employer the right tospin off assets?26 What fees will provider charge whenthe employer leaves the MEP?Contractual27 Do the provider contracts have anylimitation of liability or indemnificationprovisions?At some point an adopting employer will want to terminate theplan as to itself or establish its own plan and move MEP assets tothat plan. What will happen at that time should be known prior toparticipating in the MEP.Knowing the answer to this question will be important when theemployer decides to completely stop offering 401(k) benefits.This factor is an aspect of your “reasonableness of the fees”assessment.Current Labor Department guidance does not outright prohibitsuch provisions, but it does require plan fiduciaries to determinetheir reasonableness in the context of the arrangement.28 Remedies/ compensation available toemployer in event provider fails tomaintain the qualification of the plan29 Who pays expenses of correctingoperational errors?When the operational error relates only to a particular employer,do other employers share in the cost of fixing the problem or is thecost shared among all employers? What if the error is the“The first rule for fiduciaries is to put their interests last.”BOSTON | GREAT LAKES | LOS ANGELES | NASHVILLE | NEW YORK METRO | TAMPA | WASHINGTON, D.C.(o) 888.918.8386 www.fiduciaryplangovernance.com (f) 978.225.8398© Fiduciary Plan Governance, LLC 2012.
Representation that fiduciary liabilityinsurance will be maintainedGetting Help30 If you do not have the in-houseexpertise to address the matters in thischecklist, have you considered gettingproviders or is a service provider to the MEP hired by theprovider?An independent adviser or consultant, whose fees do not dependon whether or not your company joins the MEP, can help youassess the MEP arrangement and the reasonableness of fees andfulfill your fiduciary responsibilities.outside help?31 Have you retained ERISA counsel? Review of plan documents and agreements by an attorney is a bestpractice.**************************************Charles G. Humphrey is the principal of Law Offices of Charles G. Humphrey, an ERISA and employee benefitslaw firm located in Andover, Massachusetts and Buffalo, New York. He is also a special consultant to Fiduciary PlanGovernance Plan Governance, LLC, a fiduciary consulting firm dedicated to improving employee benefit planprocesses and reducing fiduciary liability.“The first rule for fiduciaries is to put their interests last.”BOSTON | GREAT LAKES | LOS ANGELES | NASHVILLE | NEW YORK METRO | TAMPA | WASHINGTON, D.C.(o) 888.918.8386 www.fiduciaryplangovernance.com (f) 978.225.8398© Fiduciary Plan Governance, LLC 2012.
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