The Pentegra 3(16) Administrator
SMARTPATH
TM
The Path to Simpler, Safer, Easier Plan Management
THE PENTEGRA 3(16) ADMINISTRATOR SMARTPATH™ Good retirement plans can be complicated. But servicing them doesn’t have to be. The multitude of filings, administrative duties and attention required to manage a retirement plan can be overwhelming and make it a rough road for you and your clients. Pentegra’s 3(16) fiduciary outsourcing solution makes the path simple. Today, many providers say they provide 3(16) services. Some take responsibility for a handful of tasks. At Pentegra, we sign the plan document and 5500, not only performing these duties but accepting responsibility for them. Think of it as straightening out a curve filled, risky road.
Time is Money How much time in a given day are your clients taking to manage their retirement plans? And how much time are you spending resolving retirement plan administrative issues for your clients? Today, retirement plan administration has become increasingly complex and laden with compliance burdens. For many employers, the commitment of time and energy is overwhelming and too often distracts from the more critical responsibility of running a business. As an advisor, it’s a distraction from your business as well. And when it comes to the fiduciary oversight of a retirement plan, while most plan sponsors are the Named Fiduciary of their plan, the truth is that they aren’t aware of the myriad of responsibilities that come with that role, or that these responsibilities involve significant risk. Understanding and handling these responsibilities is time away from their business and yours. Time that could be better spent focusing on growth and profitability. For both you and your clients, time is money. There’s an easier way. Outsourcing. Fiduciary outsourcing involves the transfer of legal responsibility for a retirement plan from an employer to an institutional fiduciary. Pentegra’s 3(16) Fiduciary Administrator services shifts these burdens from your client’s organization to ours. Our 3(16) Fiduciary Administrator services allow you to reduce your administrative burdens by not only handing off these tasks to us, but also handing off the responsibility for ensuring that they are handled well. It’s the SmartPath™ to plan administration.
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There’s an easier way.
Outsourcing.
Which Business Model Is Right for Your Clients? Do your clients understand the difference between a third party administrator (TPA) and a ‘first’ party administrator? Many providers say they provide 3(16) services. Some take responsibility for a handful of tasks. At Pentegra, we, not only perform these tasks, but also accept responsibility for them. That’s the Pentegra difference. We are a ‘first’ party administrator—we provide TPA services and serve as a true 3(16) administrator. With a legacy built serving as an institutional fiduciary for more than 75 years for thousands of retirement plans nationwide, Pentegra offers a level of 3(16) service that is unmatched in the industry today.
The TPA as 3(16) Fiduciary Administrator A “First” Party Administrator
TPA & Separate Fiduciary
The TPA and/or recordkeeper—is appointed as the named fiduciary and/or 3(16) administrator. The key advantage of this approach is the ability to outsource these responsibilities because under a true 3(16) arrangement, the party doing the work is also the party accepting responsibility for doing it properly.
An independent fiduciary is appointed as named fiduciary and/or 3(16) administrator as an added layer in the plan document and other governing documents and contracts. The fiduciary is not the TPA or recordkeeper, but becomes the party responsible for prudently selecting and monitoring the TPA and/or recordkeeper. Under this approach, the TPA—the party doing the actual work—is still not a fiduciary.
Non-Fiduciary TPA
The non-fiduciary TPA offers supplemental services such as document mailings or hands-free distribution processing, but does so as a non-fiduciary or accepts very limited fiduciary responsibility for certain tasks only. While this is often a low cost approach, the employer retains the bulk of the legal responsibility and therefore much of the labor and all of the fiduciary responsibility.
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An unmatched level of
Oversight.
What makes an ERISA 3(16) fiduciary so important? Contrary to common belief, most plan mistakes that occur have little or nothing to do with the investments or the investment manager, but instead, involve plan administration issues. Some of the top mistakes that occur include: • Plan document not updated to reflect law changes • Failure to follow plan terms • Not using the plan’s definition of compensation for deferrals and allocations correctly • Employer matching contribution errors • Not satisfying non-discrimination tests (ADP & ACP) • Not notifying all eligible employees of their opportunity to defer • Not complying with IRC Section 402(g) • Not depositing employee elective deferrals in a timely fashion • Hardship distribution issues • Not making required minimum contributions for top-heavy plans • Not filing a Form 5500 series return and not distributing a Summary Annual Report to all participants. By hiring a competent ERISA 3(16) fiduciary, plan sponsors are insulating themselves against these errors to a greater level than a typical TPA arrangement provides. As a 3(16) Plan Administrator, Pentegra assumes full responsibility for managing the day-to-day operations of the plan, and shifts the legal and operational burdens of the Plan Administrator role from your organization to ours.
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Shift legal and operational burdens.
The Pentegra 3(16) SmartPath™ Advantage A Solution that Takes These 50 Responsibilities Off Your and Your Client’s Plates 1. Overall operational compliance 2. Document compliance, mandatory interim amendments, restatements 3. Form 5500 4. Annual plan audit, if applicable 5. New hire processing 6. ERISA bond 7. ACA (automatic enrollment) administration 8. ACI (automatic contribution increases) administration 9. Default investment administration 10. Determination of vesting and amount of distribution 11. ERISA section 105 employee benefit statements 12. Reasonableness of fees 13. Prudent selection and monitoring of service providers 14. Benefit determinations and disputes 15. Administration of beneficiary rules 16. Worker classification 17. Nondiscrimination testing 18. Summary Annual Report (SAR) 19. Definition of compensation 20. Allocation of unallocated monies by plan year- end 21. IRC section 72(p) loan administration 22. Contribution calculations and limitations 23. Protected benefits 24. Acceptance or rejection of rollovers or transfers 25. Annual notices
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26. Segregation of assets by source 27. Coverage testing and corrections 28. Involuntary distributions 29. Episodic notices 30. Distributions 31. Hardship withdrawals 32. Qualified Domestic Relations Orders (QDRO) 33. Lost/missing participants and unclaimed benefits 34. Grandfathered plan provisions 35. Plan termination and partial termination 36. Spousal consents 37. Survivor benefits, (QJSA and QPSA) 38. Summary Plan Descriptions and Summaries of Material Modifications (SPD and SMM) 39. Timely remission of deferrals and loan repayments 40. Timeliness of other required contributions 41. Diversification requirements for plans with employer securities 42. Blackout procedures 43. Defined benefit plan duties 44. Participant fee disclosure (404a-5) 45. Fiduciary fee disclosure (408b-2) 46. Records retention under ERISA Sections 107 and 209 47. Responding to participant inquiries 48. Top-heavy minimum benefit 49. Overpayments 50. Personal liability under ERISA
Simpler, safer, easier
plan management.
Pentegra’s 3(16)(A) Fiduciary Administration Services Plan Operational Oversight and Compliance • • • •
Accept responsibility under ERISA 404(a)(1)(D) for ensuring that the plan is operated in accordance with the terms of the plan document subject to the fulfillment of any responsibilities retained by the employer This is an extremely broad responsibility: “operational compliance” is a catch-all term covering nearly everything that can go wrong in a retirement plan Includes the many requirements that must be met for a plan to be “qualified” for tax purposes Ensure proper documentation and ERISA 107/209 records retention
Plan Document Administration
• Prepare plan document and ensure compliance with applicable laws • Prepare plan adoption and trust agreements • Prepare plan qualification package • Ensure plan document is amended as required by new laws, regulations, and mandatory restatements • Obtain favorable letters of determination • Maintain records of historical plan documents
Participant Fee Disclosure • Compliance with DOL Reg. Sec. 2550.404a-5 • Gather fee information from third parties and collate the data to create the plan’s disclosure documents • Ensure timely delivery of disclosures annually and to newly eligible employees in accordance with the DOL’s rules on document delivery
Distributions and QDROs • • • •
Review and ensure the qualified status of domestic relations orders (DROs) Ensure that alternate payees are given their ERISA participant rights Review and approve distributions, including determinations of disability, death, retirement, or other distributable events Ensure that the appropriate notices are delivered and that the tax withholding rules are properly applied
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New Hire and Termination Processing • Identify eligibles based on plan provisions and employer-provided data and automatically mail packet to address of record • Administer auto-enroll provisions • Complete, up-to-date enrollment materials • Online enrollment process with live telephone backup
Hardship Distributions • • • • •
Cross-reference plan document rules since each plan may be different Test for both existence and amount of need Take only from allowable sources and only after exhausting loans and in-service distributions Suspend deferrals for six months and reinstate promptly when applicable Keep careful documentation of every distribution for the ERISA 107 period
Forfeitures and Suspense Accounts • •
Ensure that all unallocated monies are used to offset employer contributions, pay plan expenses, or are allocated to participants by plan year end Includes revenue sharing held within the plan, monies returned to the plan such as expense reimbursements, forfeitures, demutualization proceeds, legal settlements, etc.
Loans and Loan Repayments • • • • •
Establish written loan policy as supplement to plan document Review and approve loans; remove employer from loop except for payroll deductions Ensure amortization periods match actual payroll implementation Ensure each loan agreement is executed and documented Enforce quarterly deadlines and deemed distribution requirements
Corrections and E&O • SCP, VCP, Audit CAP, DFVCP, and VFCP calculations, preparation of government submission, follow-up, and implementation of corrections • Maintain an E&O account for trusteed plans to ensure an audit trail for corrections • Maintain insurance and reserves at appropriate levels at or in excess of regulatory requirements
Service Provider Selection and Oversight
Participant Notices, Statements and Disclosures
Plan Audit
• Prudent hiring of service providers not appointed directly by employer such as auditor and custodian • Review vendor fee disclosures and ensure reasonableness of fees • Regular monitoring of Pentegra appointed service providers to ensure they remain prudent and fees remain reasonable
• Preparation of notices and disclosures such as SPD, SMM, SAR, 404(c), QDIA, ACA, Safe Harbor, and 402(f); contrast with how a non-fiduciary TPA provides a boilerplate document the employer is supposed to review and approve • Ensure document delivery compliant with DOL rules on electronic disclosure • Includes beneficiaries, alternate payees, and other “interested parties”
• Select and monitor plan auditor in accordance with joint DOL/AICPA guidelines • Negotiate volume discounts • Serve as primary liaison with auditor; remove employer from loop to the maximum extent possible • Prepare plan financial statements to meet the letter of AICPA independence guidelines • Obtain and make available SOC I and II audits on internal controls to allow for a limited scope audit
Contributions
Government Filings
Compliance Testing
• Establish and enforce ERISA 402 funding policy for timing of remittances • Maintain proper source accounts and tax basis • Ensure proper investment of contributions of “defaulted” participants • Ensure rollovers into the plan are from qualified sources
• Prepare and submit filings such as Form 5500 Annual Report with applicable Schedules, Form 5558 extensions, Form 5330 prohibited transaction tax reports, PBGC premium filings, and more • Tax reporting, state and federal, including 1099-R, 1096, 945, and 1099-MISC
Claims and Benefit Determinations
Annual Plan Review Process
• Establish and administer ERISA compliant claims process • Verify identity of beneficiaries • Make benefit determinations in accordance with the plan document and ERISA • Ensure QJSA/QPSA rules are met and proper waivers obtained, including spousal consent on all loans and distributions with respect to protected sources
• Establish plan governance process and checklist • Provide completed checklist and annual review report annually • Review service provider performance and fees
• Determine plans to include for compliance testing • 401(a)(4) Nondiscriminatory Allocations • 401(a)(9) RMD • 401(a)(26) Minimum Participation testing • 402(g) Excess Deferrals • 404 Maximum Deductible Contributions • 410(b) Minimum Coverage testing • 414(s) testing for non-safe harbor compensation • ADP/ACP testing • 415 Annual Addition testing • 416 Top Heavy testing • Nondiscriminatory Benefits/Rights/ Features • Determine Highly Compensated Employees and key employees • Prepare comprehensive compliance reporting package • Provide detailed analysis of testing results • Develop corrective scenarios in the event of test failures
Make Our Expertise Your Expertise and Deliver Added Value for Your Clients With Pentegra’s 3(16) administrator services, you can partner with a professional fiduciary to relieve plan sponsors of real work, time and liability. •
Partner with one of the most experienced 3(16) Administrators in the nation
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Deliver comprehensive retirement plan administrative support
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Outsource ERISA 3(16) fiduciary administrator services to help both you and your clients comply with retirement plan fiduciary obligations
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Benefit from the services of an experienced team and the deep bench strength of an institutional fiduciary
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Spend more of your time on participant retirement readiness
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Integrate across many platforms to bring recordkeeping flexibility to every opportunity
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Share a new solution that is different than the usual talk about funds and fees
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Make the path simple
for your clients.
Partner with Pentegra to make the path simple. Our team brings experience, expertise and above all, collaboration to every opportunity to deliver retirement plan and fiduciary outsourcing solutions that genuinely add value for you and your clients.
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Let us help you achieve your goals. Contact the Pentegra Solutions Center at solutions@pentegra.com or 855.549.6689 or visit us at www.pentegra.com
2 Enterprise Drive, Suite 408, Shelton, CT 06484-4694
800•872•3473 tel 203•925•0674 fax www.pentegra.com © 2018 Pentegra All Rights Reserved