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Audit & Assurance, Employee Benefit Services

Is Your Plan Effective in Retirement Planning for Employees?

At a Glance

Main Takeaway

As a plan sponsor, ensuring your company’s retirement plan is effective for employees is essential. While the specifics of a retirement plan can vary based on a company’s number of employees and assets, the most effective plans share a common focus on beneficiary education and engagement.

Next Step

Learn more about the ERISA requirements for employee retirement plans and how an employee benefit plan audit can help ensure you have an effective plan.


Employee Retirement Income Security Act

The Employee Retirement Income Security Act (ERISA) was enacted in 1974. This federal law protects participants by detailing minimum criteria for most health and retirement plans in the private sector.

Under ERISA, retirement plans must provide participants with all pertinent plan information, including the eligibility requirements for participation, the plan’s features and funding, and the appeals process.

The Department of Labor (DOL) enacted recent changes to ERISA Section 105 requiring lifetime income illustrations for participants. The new rules state that sponsors with participant-directed plans must include income illustrations at least annually in their quarterly plan disclosures by June 30, 2022. These disclosures must contain the following:

  • The statement period’s beginning and end dates
  • The account’s value as of the end of the statement period
  • The projected value of the account balance as a single life annuity (SLA) and qualified joint and survivor annuities (QJSA)

These illustrations are intended to make it easier for participants to understand how retirement savings translate into monthly income in retirement.

ERISA requires that participants be made aware of how their current account balances will translate into monthly income in retirement. Plan administrators must add two lifetime income illustrations to their participant benefit statements annually.

An effective benefits plan includes cautionary language in connection with these income illustrations. Plan administrators should inform their participants that the lifetime income illustrations included in their benefits statement are not guaranteed. The cautionary language reminds plan participants that these statements are estimations for illustrative purposes only.

What Does an Effective Benefits Plan Look Like?

Engages Beneficiaries

An effective retirement plan engages its beneficiaries through email, company handouts, and other forms of educational outreach. These communications can help explain the nuances of a participant’s retirement plan and encourage participants to get involved in managing their retirement accounts.

Engaging beneficiaries through educational outreach can help participants understand lifetime income illustrations, the role of ERISA, the benefits of increasing their contribution percentage, the importance of maintaining regular plan contributions, and how loans may affect the growth of their retirement portfolio.

Diverse Portfolio

Effective retirement plans emphasize diversification. Plan sponsors should provide beneficiaries with educational materials that explain how diversification can help them prepare for uncertain economic and investing environments.

The United States is facing its highest interest rate increase in almost 30 years. The educational tools provided by a retirement plan can help participants understand how rising interest rates can impact their long-term bonds and how portfolio diversification can help them maximize their returns despite changes in market conditions.

Encourages Financial Wellness

Many retirement plans offer financial wellness programs to help employees develop their financial knowledge. These educational programs typically include debt management and reduction strategies, budgeting tools, savings strategies, and financial planning and investment education.

Effective financial wellness programs provide specific education to address commonly asked questions, like how to pay down high-interest debt, prioritize saving over spending, and save for a child’s college education. Online tools like interactive quizzes and videos can make complicated concepts like market volatility and diversification easier for plan participants to understand.

How an Employee Benefits Plan Audit Can Help You Maintain a Compliant Plan

It is challenging to keep up with ERISA regulations to ensure compliance as a plan sponsor. Working with a firm like Windes can help you stay on top of ERISA rule changes. In addition, Windes can make operational recommendations to improve the efficiency of sponsoring a plan.

Under ERISA regulations, specific employee benefit plans require an audit:

  • 401(k) Plan
  • 403(b) Plan
  • Defined Benefit Plan
  • Employee Stock Ownership Plan
  • Health and Welfare
  • Profit-Sharing plans

The audit requirements for your employee benefits plan depend on the number of eligible employees at the start of the plan year and where your plan lines up with the 80-120 rule. Most plans with 100 or more participants at the beginning of the plan year must have an audit.

Employee benefit plan audit services from Windes give you peace of mind that your plan provides employees with competitive benefits and that you are compliant with all ERISA sponsor requirements. We can help you at any stage of the benefits design process, from sharing the latest plan features or automation and helping you fulfill annual audit requirements.

Windes’ Employee Benefit Plans Audit Services

Windes facilitates timely and value-added audits for employee benefit plans.

We offer employee benefit plan audit expertise to help maximize retirement plan performance. Our ERISA specialists currently offer complimentary plan audit quotes to get you started. Our firm provides employee benefit plans audit services for private businesses in California and nationally.

Connect with us today to learn more about our services.

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