Benefits Consulting

The complex task of administering employee benefit plans, while complying with a steady stream of government mandates, makes it difficult to keep plan documents and procedures up to date. Even when documents reflect current policies, some human resources staff may not follow the new procedures.

Incongruities between plan documents and procedures can lead to misunderstandings and inefficiency and also make the employer vulnerable to government penalties and litigation. Increased enforcement efforts and audits by the Internal Revenue Service (IRS) and the Department of Labor (DOL) make the practice of documenting procedures and keeping them up to date more important than ever before.

In 1997, the IRS introduced a new policy to enable plan sponsors to correct operational mistakes that could threaten a retirement plan's tax qualification: the Administrative Policy Regarding Self-Correction (APRSC), later included in the IRS's Employee Plans Compliance Resolution System (EPCRS). Recognizing the importance of proper administrative procedures and the fact that mistakes are usually unintentional, APRSC provides an opportunity for employers to identify and correct mistakes before an IRS agent identifies them.

Because plan procedures and documentation are difficult to keep "in sync," Sibson Consulting developed a benefit administration review program. This program, Crosscheck, consists of a review and analysis of an employee benefit plan, through which it assists the employer to:

• Determine whether the plan complies with statutory requirements,
• Confirm that the plan procedures correspond to what the plan provides,
• Reduce expenses by identifying ways to streamline administration of the plan,
• Offer a refresher course and reference guide for human resources staff, and
• Demonstrate the employer's good-faith effort to comply with IRS and DOL rules.

Step 1: Assessing Needs

The Crosscheck process is initiated by a discussion between the employer and Sibson Consulting compliance consultants in order to obtain a detailed picture of how the plan operates. This helps to determine the scope of the compliance inquiry by identifying areas of particular concern and liability, and how best to utilize Crosscheck under the direction of legal counsel. Based on the results of this discussion, Sibson Consulting, in consultation with legal counsel, will propose the most cost-efficient manner of using Crosscheck for the employer and determine how results will be presented.

Step 2: Reviewing Documents and Administrative Materials

Crosscheck begins with a review of the plan document, summary plan description, and all related administrative materials, such as letters and notices to participants. This information forms the benchmark when looking at the plan's actual operations and plan procedures. The review addresses more than 25 topics, including government reporting requirements, claims and appeals procedures and rules governing eligibility.

Step 3: Reviewing Administrative Practices

In the next phase of Crosscheck, Sibson Consulting interviews the individuals who are responsible for day-to-day plan operations.

Compliance consultants conduct the interviews in a conversational and free-form manner, but structure their questions as part of a customized approach that ensures the administrative and regulatory areas of most significance to a particular plan are covered.

Step 4: Presenting the Results

Sibson Consulting presents findings and analysis in a Crosscheck Report with the assistance of legal counsel. The Report's findings contain an inventory of the documents that were examined, summaries of interviews conducted, a detailed discussion of statutory and regulatory requirements and what the plan document provides.

The Crosscheck Report's analysis states whether the day-to-day plan operations correspond with legal requirements and plan documents. A summary identifies areas of administration that require attention and our recommendations to legal counsel for resolving potential problems. Since the Report is a detailed study of the plan document and operations, employers may use it as a reference or staff training tool that can streamline plan administration, increase efficiency and reduce expenses while demonstrating a good-faith commitment to comply with federal regulations.

For more information, contact a Sibson Consulting office nearest you.

Back to Top