Mistakes Happen - Here's How You Fix Them
- Ellen
- 6 days ago
- 2 min read
John Lennon once said that mistakes are simply errors… until we fail to correct them. Retirement plan administration is complex, and an occasional misstep is inevitable. Their impact is determined by how they are acknowledged and fixed. Identifying compliance gaps early and addressing them efficiently is key to avoiding costly failures.
Strengthening Plan Governance and Oversight
Managing retirement plans involves striking a balance between regulatory compliance and operational efficiency. Understanding ERISA fiduciary governance principles and implementing robust compliance strategies is crucial in mitigating risks and protecting employees’ financial security. A proactive governance approach ensures that retirement plans operate smoothly and comply with regulations.
Read the plan document and the SPD to ensure administrative practice matches the written plan terms and that participants have been provided with an appropriate description of the key plan provisions. If inconsistencies or outdated language is identified, work with your service providers to determine the best timing and strategy for cleaning up these documents.
Establish written processes and procedures to maintain consistency and legal compliance – and follow them! Review and update existing policies periodically to address changes in law, regulations, plan provisions, or HR/payroll systems, and add new ones as required.
Engage key stakeholders, including ERISA counsel, actuaries, auditors, and investment advisors, to strengthen oversight. This team of professionals is your best line of defense in achieving and maintaining compliance with the myriad statutory and regulatory requirements.
Address mistakes promptly, ensuring minor issues don’t escalate into significant compliance risks. Thoroughly assess the full scope of the problem, address all instances, maintain consistency in your approach, and identify necessary actions to prevent it from happening again.
Correcting Plan Qualification Failures
The IRS Employee Plans Compliance Resolution System (EPCRS) offers structured methods for addressing common operational failures, which, if left unchecked, could lead to the plan’s disqualification.
Correcting Other ERISA Violations
The U.S. Department of Labor also offers several correction programs to assist plan fiduciaries in correcting other plan administration failures.
Voluntary Fiduciary Correction Program (VFCP): Requires submission to the IRS for approval, with associated filing fees. Generally, the correction procedure is the same as would be used under SCP, but with the added comfort of being “blessed” by the IRS.
Delinquent Filer Voluntary Compliance Program (DVFCP): Encourages plan sponsors who failed to meet ERISA’s annual reporting requirements to bring the plan back into full compliance in exchange for payment of a significantly reduced penalty.
The DOL also provides a wealth of resources on its website to assist plans in understanding and meeting their responsibilities.
Final Thoughts
It’s easy to overlook things that are right in front of your eyes when “that’s how it’s always been”, and very difficult to identify more complex issues that arise infrequently. Engaging an independent compliance expert to view your plans with fresh, unbiased eyes can reveal weaknesses in your administrative procedures and inconsistencies between the plan’s governing documents and its operations. When mistakes are discovered, it presents an opportunity to learn, assess, and improve the plan’s operations and safeguard the integrity of participants’ benefits.
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