selecting an open mep employers due diligence checklist - Fi360

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involved with the MEP?11 Is there an ERISA attorney advising theMEP and maintaining the plandocument? If so, what is theirbackground specific to MEPs?Plan Documentation12 Consists of basic plan document andjoinder agreementUsing the joinder or participation agreement the adoptingemployer will elect the specific eligibility, vesting andcontributions that will apply to its employees.13 Plan Administrator identified Generally the plan sponsor/provider or the provider’s advisorycommittee who will be responsible for most the plan’sadministrative functions such as coverage and discriminationtesting, annual reporting, hiring of service providers, andnotifications to participants.14 Named Fiduciary identified Generally the plan sponsor/provider or the provider’s advisorycommittee who will be responsible for the selection andmonitoring of plan investments and investment advisers.Basic MEP Structures15 Plans operated by third partyadministrators (TPAs)16 Plans operated by registered investmentadvisors (RIAs)17 Plans operated by independent plansponsorsSelf-Dealing and ProhibitedTransactions18 Is there a proper separation of the rolesand ownership structure of the MEP’splan sponsor, independent fiduciary,and contracted service providers?19 How are all of the parties paid? Arethere potential conflicts of interest orprohibited transactions?The providers operating MEPs described in lines 15-17 arefiduciaries and may not use that authority to benefit themselves ortheir affiliates, to determine their own compensation or paythemselves out of plan assets20 Does provider have any ability todetermine its own compensation or topay its affiliates additionalcompensation?Reasonableness ofCompensation21 What is the amount of compensationpaid to the provider and other serviceunder the arrangement? Is itIf the proposed arrangement has such a feature, the arrangementmust be rejected.Services provided to a plan by service providers are subject toERISA Section 408(b) (2) which requires that no more thanreasonable compensation be paid for them.The employer should seek information from the provider aboutfees and compare that information to the fees charged by otherproviders offering similar services. This is often called“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.
easonable?Plan Administration andFiduciary Structure22 Who is handling the administration(TPA) work, fiduciary oversight, andplan operations?23 Does the provider have written policiesand procedures?24 If the answer is, yes, have thosepolicies and procedures been audited orcertified by an entity independent of theprovider?Fiduciary Liability Insuranceand Related Liability Items25 Does the Employer maintain fiduciaryliability insurance?26 Has the provider, within the last fiveyears, been sued or settled claims byemployers in connection with theprovision of services under the MEP?27 Has the Plan, within the last five years,been audited by the IRS or LaborDepartment? If so, what were thefindings/results?28 Is the provider willing to provide youreferences and contact information foremployers who currently or formerlyparticipated in the plan?29 Has the provider used the IRS EPCRSprogram or the Labor DepartmentDelinquent Filer or FiduciaryCorrection Program within the last fiveyears to correct problems with theoperation of the plan?Employer Responsibilities30 Provision of Eligibility data such asdates of hire, birth dates, and hours ofservice to the provider.31 Have appropriate arrangements beenmade for the transfer of payroll data?Do the compensation data codes alignwith the definitions of compensation inthe Plan?32 Employers have responsibility totransfer salary deferral amounts takefrom pay as soon as those amounts canreasonably be segregated from planassets.“benchmarking.”Employers considering adopting a MEP must assess whether theprovider can do the job.If none are in place, the employer should look for anotherprovider.Evidence of certification shows that the provider is serious aboutits business and intends to apply the highest standards in planoperations.The employer will want to know the amount and the carrier.The employer must timely provide accurate information to theMEP provider. This is a responsibility the adopting employerwill not escape under any arrangement.The transmittal of correct compensation information can haveserious implications as it affects the amount of contributions anddiscrimination testing.The failure to satisfy this requirement can result in a prohibitedtransaction and the imposition of excise taxes on the employer.“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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