selecting an open mep employers due diligence checklist - Fi360

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33 Clarification of responsibility for othertasksPlan Investments34 Responsibility for maintenance of planinvestment policy statement (IPS)35 Any responsibility in employer forselecting plan’s investment line-up?ParticipantEducation/Investment Advice36 Who is responsible for educatingparticipants?37 Will individualized investment advicebe provided to participants, usingmodel or level fee arrangement?Reporting to the Employer bythe ProviderBecause ERISA and the Internal Revenue Code impose importantdisclosure requirements on employers and plan administrators,employers must know what, if any, responsibilities they have.These, to name a few, include the provision of SPDs, QDIA andother notices. Which of these responsibilities will be performed bythe provider?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?Does the arrangement comport with Labor Department rules, sothat self-dealing prohibited transactions are avoided?Although adopting a MEP relieves employers of operationalresponsibilities, employers have oversight and monitoringresponsibilities. Thus, they must have reports from the providerregarding plan operations.38 Annual 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..39 Additional Reports Any other report to the employer that the employer may need in itscapacity as participating employer including any informationneeded to protect itself from liability in regard to the plan orcorrect a problem. Timely provided ADP and ACP discriminationtesting results is an example. A copy of the MEP’s Form 5500annual information return should also be provided.Getting Out40 Does the MEP plan document reservethe participating employer the right tospin off assets?41 Can the provider throw you out of theMEP; for what reasons; under whatterms?42 What fees will provider charge whenthe employer leaves the MEP?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 information is valuable for two reasons: (i) you will know inadvance under what circumstances this could happen and (ii) it isimportant to know that employers with compliance problemsthreatening the overall plan can be removed from the plan.This factor is an aspect of your “reasonableness of the fees”assessment.Contractual43 Do the provider contracts have any Current Labor Department guidance does not outright prohibit“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.
limitation of liability or indemnificationprovisions?such provisions, but it does require plan fiduciaries to determinetheir reasonableness in the context of the arrangement.44 Remedies/ compensation available toemployer in event provider fails tomaintain the qualification of the plan45 Who pays expenses of correctingoperational errors?46 Representation that fiduciary liabilityinsurance will be maintained47 Representation that the security andconfidentiality of personal informationwill be maintained under State privacylaws.Documents to Request fromProvider Prior to Adoption ofMEP48 Plan document and joinder agreement49 Plan policies and procedures50 Investment Policy Statement51 Annual Returns (last three years)Getting Help52 If you do not have the in-houseexpertise to address the matters in thischecklist, have you considered gettingWhen 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 theproviders 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?53 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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