Preparing for Your Plan Audit, Part 5: Minutes and Amendments
March 29, 2022
By Robert Reilly
Plan fiduciaries and management have an important responsibility and duty to plan participants. To execute these duties, a formal committee should be in place to monitor the plan’s operations and investments. This committee generally meets quarterly or monthly. Some of the items to be discussed include plan amendments, investment changes, approval of discretionary contributions and use of forfeitures, monitoring of investments and investment policy, review of SOC 1 reports of service organizations (including consideration of user controls), plan expenses, selecting and monitoring of third-party service providers, and cybersecurity programs.
In overseeing plan operations and carrying out these duties, many critical decisions are made that impact the plan and its participants. It is highly recommended that plan sponsors keep written minutes of these meetings. This documentation serves not only to memorialize the decision and actions of the committee, but also to demonstrate that prudent care is taken to administer the plan and protect plan participants and the benefits to which they are entitled.
Another plan governance requirement is maintenance of signed plan documents and all executed plan amendments. These documents serve as the foundation for plan operations. Plan management will want to be familiar with the plan documents and amendments, especially when they are drawn up by a third-party service provider, and periodically review the documents to make sure they remain current. Understanding and following the terms of the plan are key aspects of plan governance and critical in avoiding plan operational errors. When restating plan documents, it’s easy to check the wrong box and unintentionally change the plan’s provisions. A best practice when restating plan documents is to compare the prior version to the current version to ensure any changes to provisions are intentional.
Plan management also needs to continually monitor the plan for required plan amendments. For example, there are many plan amendments that may be required to be executed this year. The CARES Act, the Consolidated Appropriations Act of 2021 and the SECURE Act included both mandatory and optional plan provisions, and plans must generally be formally amended by December 31, 2022, to reflect these plan changes. Do not wait until December to start the process. We encourage you to speak with your plan document provider sooner rather than later so that the documents can be drafted and finalized in a timely manner.
Not only are plan amendments and meeting minutes vital for documenting adherence with ERISA and demonstrating meeting fiduciary obligations under ERISA, these documents also provide your auditors with information they will need to properly plan and execute your plan audit. Maintaining these documents and providing them early to your auditors will provide for a smoother and more efficient audit.
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