Plan Sponsors Ask | Q4 2021

Plan Sponsors Ask | Q4 2021

October 15, 2021
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Q: Our plan committee has worked hard this year to maintain a consistent system of checks and balances with regard to plan compliance. Are there any items in particular we should prioritize in terms of staying compliant with our retirement plan?

A: There are definitely some potential compliance violations that are more common among retirement plans. The Government Accountability Office recently published a 56-page report, (https://tinyurl.com/hmjxb5zk), which provides updated information regarding the Employee Benefits Security Administration’s (EBSA’s) enforcement activities and how the agency is working to improve their investigative and enforcement processes.

As far as retirement plans go, the most common Employee Retirement Income Security Act of 1974 (ERISA) violation categories found in closed EBSA investigations through 2020 included:

  • Fiduciary imprudence (869 cases)
  • Exclusive purpose (793 cases)
  • Fiduciary self-dealing (543 cases)
  • Prohibited transactions with a party in interest (457 cases)
  • Failure to follow plan documents (344 cases)
  • Improper benefit to employer (235 cases)
  • Duty of disclosure: plan descriptions and summary plan descriptions (183 cases)
  • Bonding (159 cases).

Your plan advisor is a great resource to help you better understand what these violations encompass and how best to avoid them.

Q: Over the past couple of years, some of our retirement-age employees have opted to continue working. While their expertise and experience are invaluable, it has resulted in some unplanned challenges for our organization. Do you know if this is part of a growing trend?

A: It is somewhat of a growing trend and understandable if it catches many plan sponsors by surprise. Consider the following:

  • According to a 2020 Employee Financial Wellness Survey by iGrad/Wellable, one-third of employees nearing retirement (ages 55–64) feel they don’t have enough saved to retire.
  • According to PwC’s 2020 Employee Financial Wellness Survey, delayed retirements can be expensive for employers, with increased annual costs of 1% to 1.5%. The survey noted that workers delaying retirement usually have more paid sick leave and vacation days, along with higher life, disability, and health insurance costs.

There are some basic things you can do as a plan sponsor to help buck the trend. For example, if you haven’t already, consider leveraging auto enrollment and auto escalation to encourage more effective saving strategies among employees. Also, make sure employees over the age of 50 are aware of “catch up” contributions — extra money they are allowed to save toward retirement each year ($6,500 is the amount for 2021, on top of the $19,500 maximum that all employees can contribute). You may also want to think about implementing some basic personal finance education, focusing on topics such as budgeting and debt management, to help improve the overall financial health of your employees.

Q: Cybersecurity will be a big topic for our year-end plan review meeting with our advisor and recordkeeper relationship manager. To help us prepare for that discussion, has there been any guidance issued from the Department of Labor?

A: Earlier this year, the U.S. Department of Labor (DOL) released first-ever guidance for plan sponsors, plan fiduciaries, recordkeepers, and plan participants on best practices for maintaining cybersecurity. In addition, the DOL issued informal guidance noting that “responsible plan fiduciaries have an obligation to ensure proper mitigation of cybersecurity risks.”

  • The first piece of guidance offers tips for hiring a service provider with strong cybersecurity practices and monitoring their activities.
  • The second piece of guidance lays out cybersecurity program best practices to help plan fiduciaries and recordkeepers stay on top of their responsibilities to manage cybersecurity risks.

Lastly, the DOL issued online security tips aimed at plan participants and beneficiaries who check their retirement accounts online.

You can access EBSA’s full guidance here: https://tinyurl.com/4zd63xr7.


At Diversified Financial Advisors, we believe with the right plan design, we can create successful retirement outcomes for your business and employees.

We are happy to help, if you have any questions or would like additional insight, please feel free to reach out to me at joe@diversifiedfa.com or 800.307.0376.

Disclosure: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. Investment Advice and 3(38) Investment Fiduciary services offered through Diversified Financial Advisors, LLC, a Registered Investment Advisor. 3(16) Administrative Fiduciary Services provided by PISTL Service Corporation. Discretionary Trustee services provided by Printing Industries 401k Trustees. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

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