Erisa PLANS

ERISA PLAN stands for Employee Retirement Income Security Act. This law sets the guidelines and standards for qualified plans, pensions, and welfare plans to protect employees and their beneficiaries. These are retirement plans that are established by the employer for the benefit of the employee, guided by rules that are in the best interest of the employee.  

A  fiduciary is the one who exercises discretionary authority or control over a plan's management or assets, including anyone who provides investment advice to the plan. This can be an individual, company, or trust.

Regarding ERISA plans, there are three different classification of Fiduciary and level of liability taken on.

• 3(16) Fiduciary - This is where the fiduciary generally handles all administrative functions, such as reporting and the disclosure requirements. A vendor who serves as 3(16) Fiduciary is responsible for ensuring that the plan is created and managed according to the criteria set forth by ERISA. If the plan has no administrator, then you automatically take on the role of plan sponsor. That means you assume the liability. 

• 3(21) Fiduciary - This is where liability of the fiduciary is shared between the client and the 3(21) Fiduciary for the plan investments. The 3(21) Fiduciary recommends the selection and replacement of plan investment options, but the plan sponsor must approve changes. 

• 3(38) Fiduciary -  This is where the fiduciary is responsible for the investment selection, monitoring & replacement of the plan options, and the plan sponsor is informed before changes are made. A majority of the investment responsibilities are lifted from the plan sponsor and assumed by the 3(38) fiduciary. A 3(38) fiduciary is best suited for plan sponsors who do not have the time or do not want to be responsible for the plan’s investments.

Rules and Regulations are constantly changing. We highly recommend going with a 3(38) Fiduciary to mitigate the risk and liability to the plan sponsor (company providing the plan to their employees) and to allow the company to focus on the business. 

Working with Ruggiero Group Benefits, LLC to establish or manage your company ERISA plan  will save you time and money. By bringing on a Third Party Administrator (TPA), you are mitigating risk as a company. The TPA assumes the risk and liability, mitigating the company exposure. 

What is the role of a Third Party Administrator?

A Third Party Administrator is an organization that is hired by the plan sponsor (your company) to run the day-to-day operations of your retirement plan. 

These tasks include:

• Amedinding and restating plan documents.
• Preparing employer and employee benefit statements. 
• Assisting in processing all types of distributions from the plan.
• Preparing loan paperwork for plan participant.
• Testing the plan each year to gauge its compliance with IRS non-discrimination requirements as well as plan and participant contribution limits.
• Allocation of employer contributions and forfeitures. 
• Calculating participant vested percentages. 
• Preparing annual returns and reports required by IRS, DOL or other government agencies.  

The most important investment that you can make into your company is the employees that work for the organization. They are not only creating or selling your product, they are an advocate for the brand, and a representative of the core values the company carries in the public eye. 

There are many different options for an employer to take care of their employees. One of those ways is to establish a Qualified Retirement Plan that will allow the employee to establish a plan earmarked and focused on the future financial growth. Pensions that use to give employees a sense of security by providing a guaranteed income in retirement years have been phased out over the years, leaving very few establishments that still offer that security. It is now up to the individual to plan for income in his or her later years. This is where ERISA comes into place and a Fiduciary that keeps up to date with the rules and regulations that are always changing. 

Providing an employer-sponsored plan for your employees allows them to put away for retirement Pre-Tax before receiving that money in their paycheck. There is a better chance the individual will contribute to their retirement prior to receiving the funds in their paycheck than after they receive the funds. This is because they factor in the deduction from their paycheck as money they never received and cannot spend.

There are different types of Qualified Plans that can be established. Your type of business registration, employees, and other factors will dictate the type of plan that you should establish. 

Below is some information to give you a brief description on the options available to businesses and corporations. In order to determine the plan best-suited for your business, please contact an advisor to assist you.