Design and administer an effective plan

Plan design

An employer’s plan design should match their organizational structure, their business objectives, and their goals for participants. When assessing underlying objectives, it’s important to ask a variety of focused questions that will help in making a host of plan design determinations.

• Will this plan serve as my employees’ primary retirement savings vehicle, or will it be part of a suite of retirement savings options?
• Will this plan replace, or partially replace, a prior plan that may or may not continue to provide retirement income accumulation for employees?
• How much responsibility should employees take for their retirement security, and how much security should we provide them?
• Is our goal to maximize benefits for certain employees, or do we want to provide the exact same level of benefits for all employees?
• Do we want to cover all employees, or only those in a certain class or that take certain actions within the plan?
• Do we want to encourage employees to remain with the company for an entire career, or do we want to attract and accommodate employees who may stay with us for only a short period of time before moving on to another employer?
• What are our current employee demographics, and do we wish to maintain them going forward or would we like to change them over time?

Once your governing business objectives are determined, various plan design options appropriate for your type of business entity (corporation, partnership, tax-exempt organization, etc.) can be explored. You’ll also want to consider the resources available to manage the plan as well as your organization’s ability to support ongoing required administration tasks such as annual testing, annual monitoring of benefit limits, participant notification and disclosure requirements, plan amendment and determination rules, any collective bargaining requirements, and the handling of ongoing payroll.

An effective plan design must also comply with a vast array of legal requirements. Prudential offers a broad range of expertise and services to help plan sponsors design and maintain an effective and compliant plan.

Our pre-approved Volume Submitter document provides flexible design options. And our Retirement Plan Consultants offer a consultative approach to help you to understand how various provisions can align with your organization’s overarching plan goals while remaining compliant with ever-changing laws and regulations.

Plan Administration

After a plan has been designed and drafted, sponsors need to be certain that they fully understand all plan documents and have reviewed all related administrative procedures to ensure alignment with document provisions. In performing this type of review, remember that plan administration involves both internal processes, such as payroll operations, as well as externally-provided plan recordkeeping and trust services. Key considerations and areas for review should include:

• Timeliness of providing employer contributions to the plan to comply with minimum required contribution requirements. In addition to standard legal timing requirements, the plan may impose its own timing rules
• Timeliness of submitting PBGC premium payments to the PBGC within the required timeframe
• Ability to distribute required participant notices reflecting legally-required content in a timely manner
• Compliance with Discrimination Testing requirements
• Compliance with Annual Reporting requirements

All plan documents and supporting processes should be reviewed at least annually. Regular reviews help to ensure that any changes in employee demographics, internal procedures, discretionary plan design changes, or governing laws or regulations are reflected in both your documents and your processes. Prudential has developed a helpful document inventory that you may refer to when beginning your review. Keep in mind that retaining any documents used to complete regular compliance reviews is a critical component for audit preparedness.

In the event that any discrepancy between plan provisions and operations is identified, both the Department of Labor (DOL) and the Internal Revenue Service (IRS) offer correction programs for certain compliance issues. More information is available on the DOL and IRS websites, but Prudential will gladly work with you to gather data needed to use these correction programs.