Lecture 28 Administration of Retirement Plans and Related Issues Plan Installation Plan Administration Investment Issues Plan Termination Pension Benefit Guaranty Corporation

Plan Installation Adoption of the plan Plan year Advance determination letters Master, prototype and pattern plans Checklist for plan installation

Plan Administration Plans exempt from ERISA requirements –Governmental plans –Church plans –Plans limited to workers’ comp, unemployment insurance and disability insurance laws –Other exceptions Plan administrator Claims procedure Tax withholding

Plan Administration - (cont.) Reporting and disclosure –Summary Plan Description (SPD) –Annual Report (Form 5500 Series) –Report on Termination, Merger or Other Changes –Individual Benefit Statement –Underfunded Plan Reports

Investment Issues Fiduciary requirements –Solely in the interest of participants –Exclusive purpose of providing benefits –Prudent person –Diversify investments Prohibited transactions –Party-in-interest –Penalties Unrelated business income

Investment Issues - (cont.) Investment policy –Growth oriented strategies –Risk –Social effects –Social investing

Plan Termination When should a plan be terminated? Asset-reversion terminations –Penalty of 50% of reversion unless: Replacement plan Pro-rata benefit increases of 20% of reversion Bankruptcy of employer Consequences of termination –Business necessity –Treated as nonqualified plan –Vesting of 100%

Pension Benefit Guaranty Corporation Plans covered Benefits insured –Vested pension benefits –Limited to $750/month (indexed - $ in 1997) PBGC funding and premiums Plan termination procedures –Reportable events –Allocation of plan assets –Voluntary plan termination –Contingent liability of employer (30% of net worth) –Multiemployer plans Withdrawal liability