4 Plan Review Best Practices for Plan Sponsors

By Jessica Maldonado

Did you know that the Internal Revenue Service requires most employers to restate their retirement plan documents every 6 years? This helps ensure that retirement plans are operating under the most recent laws governing plans and all regulations are being met. Even though Searcy Financial manages retirement plans for other businesses, we also have to restate our own company plan. Our plan came up for restatement this year so we are sharing some best practice guidelines we follow or suggest during a restatement period.

1. Ask Your TPA about New Changes

As changes to laws occur, you may not fully understand them or the implications of those changes to your plan. For example, there is new language that allows a plan sponsor to treat a Life Partner as they would a spouse. This is an optional election so when you consider your team demographic, you have to determine if that specific change makes sense for your employees and whether or not it creates additional administrative burden. The easiest thing to do from the administrative standpoint may not always be in the interest of the plan participants and their beneficiaries so careful consideration of simple changes such as this could make for a better plan depending on the needs of your employees.

2. Design a Plan that Encourages Meaningful Savings

By offering our employees a dollar for dollar match up to 4 percent in their retirement plan, we encouraged them to save. But we don’t just want our employees (or the employees in the retirement plans we manage) to save, we want them to thrive. After strategizing ways to encourage more saving, we restructured our contribution to a dollar for dollar match up to 3 percent, then $0.50 for the next 2 additional dollars. Employees still have the opportunity for the same 4 percent match, but now have to increase their own savings rate to reach it, encouraging them to defer even more.

3. Combine Your Restatement with a Request for Proposal (RFP)

In addition to the required restatement, plans are also required to periodically review their plan providers and make sure they are abiding by their stated agreements and offering quality service to the plan for a reasonable price. A review of your plan will typically cover goals/objectives, fees, plan design, investments, and employee participation. By reviewing your plan design and providers at the same time as your restatement, you can get all of your updates done simultaneously and move forward with an optimal plan, while potentially saving time and money.

4. Review the Impact of Terminated Employees

When terminated employees choose to stay in an employer-sponsored retirement plan, they have an impact on the plan’s fees and its ability to meet its fiduciary obligations. Some employers force plan balances into Individual Retirement Accounts (IRAs) so they don’t run the risk of becoming disconnected from former employees, and thus unable to fulfill their fiduciary obligation to communicate plan updates with participants. Additionally, some plan sponsors modify the plan’s fee structure to allow terminated employees to stay in the plan and pay their own expenses without becoming a drain on active participants’ accounts.


Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Originally published by Johnson County Lifestyle magazine. Published for the Searcy Financial Services blog on August 6, 2015 by Searcy Financial Services, your Overland Park, Kansas Financial Planner and Investment Manager. 

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