As human service organizations are continually being asked to do more with less, we continue to see the following challenges when it comes to truly managing an organization’s retirement plan in the proper way:
- Lack of staff hours dedicated to delivering audit requests and review of provider fees
- The lack of an updated or optimized plan design
- Lack of fiduciary advisory services leading to increased liability
- Failing to understand the menu of investment options
Common Plan Administration Pitfalls
Due to these challenges, there are many ways that plan administration can come up short when managing a retirement plan. Compensation definition errors, mistakes in plan eligibility, loan and withdrawal distribution failures, and late filings of audit deliverables are just a few to name.
The Pooled Employer Plan (PEP) Solution
Fortunately, there is a valuable solution available via a transfer of assets to a Pooled Employer Plan!
Reduced Fiduciary Responsibility
First, management will no longer be the fiduciary overseeing plan administration, as the PEP and its providers will take on these responsibilities. With retirement industry professionals at the helm, a more structured administrative process may be implemented, while reducing the risk of error.
Time and Administrative Savings
Second, true optimization results in using the Organization’s time effectively. The staff burden for annual audits and Form 5500 filings, would be greatly reduced under a PEP. The Form 5500 and audit is applied at the overall consolidated PEP level, eliminating your need to file an audited financial statement for your plan.
Cost Savings and Efficiency
Although PEPs are relatively new (in comparison to other plan types), they have already demonstrated significant cost savings. While the Organization’s plan design remains nearly the same, combining assets with other plans proves to be a cost savings mechanism. In fact, several plan sponsors have saved as much as $100,000 in direct costs, while also reducing the time and manpower required to manage these plans.
Bringing in the Right Expertise
Optimizing the administration of your plan typically involves having experienced retirement plan professionals both oversee the administration of your plan and take ERISA fiduciary responsibility for that oversight. For some organizations, this expertise and focus can be efficiently obtained through either hiring directly in your organization or hiring a full suite of fiduciary service providers.
However, most organizations have found the easiest way to bring on this expertise is through joining a PEP. By shifting fiduciary and administrative burdens to a PEP, organizations can reduce their challenges of managing a retirement plan and refocus efforts on their core mission or business.
If you need further guidance or have any questions on this topic, The Bonadio Group and High Probability Advisors are here to help. Please do not hesitate to reach out directly to myself, Kevin Testo, at ktesto@bonadio.com or Jeffrey Coons, Chief Risk Officer & Director of Institutional Services at High Probability Advisors, at jcoons@highprobabilityadvisors.com.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
