As a plan fiduciary, it’s your responsibility to make sure you’re following the terms of the written plan document. Failure to do so could expose you to potential legal and regulatory action, including penalties, taxes, and fines.
For starters, you should be aware of where valid plan documents are stored and ensure that all current documents are signed and being adhered to.
Your fiduciary responsibility includes: 1) knowing and following the terms of the governing plan documents, and 2) reviewing the documents to determine if they comply with ERISA. For many sponsors, however, the first step is to simply identify their governing plan documents.
This isn’t always as simple as it might seem. For example, which plan documents are the current ones? What about plan amendments—are they considered governing plan documents? And are documents such as investment policy statements, QDRO policy, and loan procedures considered governing plan documents for the purposes of Sec. 404 of the Internal Revenue Code?
As you review your plan documents, make sure they are all properly signed by the appropriate signatories. This is an easily overlooked detail that could have serious negative repercussions on your plan.
Unsigned plan adoption agreements and amendments could be deemed invalid by the IRS or DOL and constitute a fiduciary breach. If there are no valid governing plan documents, the plan is not operating under IRS qualification rules and could be subject to penalties and/or taxes on plan contributions and assets.
Keeping a close eye on your duties as they relate to governing plan documents could help prevent fiduciary problems later. This is especially important when it comes to prototype plan documents with no drafting flexibility. In this case, it might be smart to use a “volume-submitter” type of pre-approved document instead of a prototype so you at least have limited customization capabilities.