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WHEN DOES BONDING APPLY TO A PLAN?

Bonding applies to a plan if, 95%* or more of plan assets are: Qualifying employer securities Participant loans Assets held by regulated financial institutions (e.g., banks, insurance companies, registered broker dealers) Mutual fund shares Assets in the individual account of a participant over which the participant may exercise control. * Measured at the beginning of … Continue reading WHEN DOES BONDING APPLY TO A PLAN?

WHAT PLAN TYPES REQUIRE A FIDELITY BOND?

Under Section 412 of The Employee Retirement Income Security Act of 1974 (ERISA), it is stated that: “Every fiduciary of an employee benefit plan and every person who handles funds or other property of such plan shall be bonded.” Under ERISA, a “fiduciary” is defined as a person who “(i) exercises any discretionary authority or … Continue reading WHAT PLAN TYPES REQUIRE A FIDELITY BOND?

WHAT IS A PLAN AMENDMENT? DOES IT DIFFER FROM AN SMM?

As previously mentioned, the plan document is the written instrument for administering the plan and for the payment of benefits. When a change to the plan is necessary, the plan must reflect the amendment accordingly. Plan amendments generally require a designated officer of the company, or the board of directors to formally amend the written … Continue reading WHAT IS A PLAN AMENDMENT? DOES IT DIFFER FROM AN SMM?

WHAT IS “SUMMARY OF MATERIAL MODIFICATION” (SMM)?

SMM is the instrument used for amending the SPD. Any time a plan is amended, employers have the choice of reissuing a new SPD or amending the current SPD by providing an SMM. This SMM summarizes the change(s) to the SPD that resulted from the plan amendment(s). It is required to distribute the SMM to … Continue reading WHAT IS “SUMMARY OF MATERIAL MODIFICATION” (SMM)?

WHAT IS A PLAN NUMBER?

Each plan is designated a unique plan number, the plan number is also used for filing Form 5500. However, Even if you are not required to file a Form 5500, it is beneficial to assign each plan a separate number for identification purposes. Welfare plans typically begin with 5XX.

WHAT IS THE PLAN YEAR?

It is a 12-month period, for which benefits are being paid under the plan. For most plans, the period selected will be either a calendar year or the tax year of the plan sponsor/company. Due to the fact that the benefits usually represent a tax advantage of some sort, it’s convenient to have the plan … Continue reading WHAT IS THE PLAN YEAR?

WHAT ARE WELFARE PLAN REQUIREMENTS?

Most importantly, a plan covered by ERISA must be established and maintained pursuant to a written document (i.e. the Plan Document and Summary Plan Description). The benefit plan must also identify the plan’s fiduciary (ies), who are responsible for the operation and administration of the plan. Finally, the plan must identify the procedure for amending … Continue reading WHAT ARE WELFARE PLAN REQUIREMENTS?

IF I HAVE AN INSURANCE CERTIFICATE, DO I STILL NEED TO CREATE A PLAN DOCUMENT?

State law generally dictates benefits that must be covered for the state in which an insurance certificate is issued. ERISA-required verbiage and/or other general provisions contained within an SPD are rarely outlined on a certificate of insurance. ERISA Documents Inc. will create a “wrap” document along with a Summary Plan Description to incorporate your insurance certificate … Continue reading IF I HAVE AN INSURANCE CERTIFICATE, DO I STILL NEED TO CREATE A PLAN DOCUMENT?

WHO CREATES A SUMMARY PLAN DESCRIPTION (SPD) OR PLAN DOCUMENT?

The employer or “plan sponsor” is ultimately responsible for establishing the written Summary Plan Description or plan document for its employees. The Fiduciary or plan administrator is generally responsible for administering the plan and ensuring that the provisions contained within are properly enforced. While a third-party administrator, insurance carrier, consultant, law firm, or other outside … Continue reading WHO CREATES A SUMMARY PLAN DESCRIPTION (SPD) OR PLAN DOCUMENT?

WHAT IS A POP (PREMIUM ONLY PLAN) AND HOW WILL CODE SECTION 125 APPLY?

Premium-only plans were designed to provide employers with a means to offer pre-tax premiums for specific welfare benefits. The Internal Revenue Code Section 125 specifically outlines where pre-tax deductions are applicable. Favorable tax treatment requires that Section 125 imposes certain limitations on when plan/benefits may be changed; otherwise, elections must remain in effect for the … Continue reading WHAT IS A POP (PREMIUM ONLY PLAN) AND HOW WILL CODE SECTION 125 APPLY?

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