Current Thinking

What’s Included In A Plan Document

No one wants to hear the word “prison” when discussing the administration of retirement plans. But it is unavoidable in one case, which proves how a qualified 3(16) administrator like Pentegra can sometimes prevent clients from hurting themselves.

Like most administrators, Pentegra issues plan enrollment kits to employees qualifying to participate in a given employer’s retirement plan. This booklet contains important information about the retirement plan, including details about the importance of saving for retirement, eligibility, plan provisions and investment options.

We had an instance with a client in which we started to receive larger than normal quantities of returned enrollment kits. One of our fulfillment team members noticed that a lot of the kits being returned had the same address.

Further investigation revealed that the employees did indeed share an address, though it wasn’t a big house…but The Big House: The “house address” was actually the address of a prison. As it turns out, the client had started to employ prisoners, but neglected to inform Pentegra of this action. 

Complications arose from the fact that, while the client’s contract with the state excluded the incarcerated employees, its plan document did not. 

As the 3(16) fiduciary administrator for the plan, naturally, this set off a long series of conversations around the definition of an ‘employee’ and a great deal of discussion with our legal team. Ultimately, we accepted that the client did not consider these workers ‘employees’ by their definition, but the whole issue could have been avoided by reviewing the plan document.

Not fully understanding what is, and is not, included in the plan document is an unfortunately common occurrence with plan sponsors – and can sometimes lead to some unfortunate results, for sponsor and employee alike. And anytime a client is doing something that involves or could potentially affect the plan, the administrator needs to know about it so they can consult and prevent any future issues. A good 3(16) administrator handles these issues for clients, so they don’t have to give it a second thought.

Dotting all the i’s and crossing the t’s…running your plan according to the terms of the plan document is key to avoiding penalties and trouble…that’s the value of a 3(16) administrator.

About the Author

Richard Rausser

Richard W. Rausser has more than 30 years of experience in the retirement benefits industry. He is Senior Vice President of Thought Leadership at Pentegra, a leading provider of retirement plan and fiduciary outsourcing to organizations nationwide. Rich is responsible for helping to shape and define Pentegra’s viewpoint on workplace retirement plans, plan design strategy, retirement success and employee savings trends. His work is used by employers, employees, advisors, policymakers and the media to produce successful outcomes for American workers.  In addition, Rich is responsible for Pentegra’s Defined Benefit line of business, which includes a team of Actuaries and other retirement plan professionals as well as Pentegra’s BOLI line of business.  He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.