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As we approach the start of another year, it may be time to give your retirement plan a check-up. If your business sponsors a retirement plan for your employees, you have a responsibility to operate your plan in a manner that meets the best interest of your employees. That means paying attention to both the technical aspects of your retirement plan operations as well as reviewing investment alternatives to see that they continue to meet the needs of your employees.

If you're like many business owners, you may have hired a third-party administrator or investment professional to handle your retirement plan. However, under the fiduciary rules governing plans, the responsible individuals at the business sponsoring the plan still have a duty to review the actions of those you've hired to assist you. Not paying attention to that responsibility can cost big in audit penalties or fiduciary liabilities. The Internal Revenue Service has a list of questions you need to address annually:

1. Has our plan been updated to reflect recent law and regulation changes? Congress, the Department of Labor and the Internal Revenue Service continue to issue new laws and regulations governing plans. Your plan needs to be updated periodically to meet these new rules.

2. Has our plan been operated according to the terms of the plan document? Many plans have complex rules to follow and failure to adhere to them is a common mistake that can disqualify you plan.

3. Has our plan satisfied all of the non-discrimination tests? There are many discrimination tests that a plan must meet annually to remain qualified.

4. Were all eligible employees given the opportunity to participate? As a plan sponsor you need to monitor employee census information and see that employees are afforded the opportunity to participate when eligible.

5. Were applicable annual plan limits followed? Congress has limited the amount of contributions employees and employers can make to a retirement plan. Exceeding those limits may disqualify your plan.

6. Have employee elective deferrals been deposited timely? This is a key enforcement issue with the Department of Labor. Employee contributions MUST be separated from the general assets of the employer as soon as it is feasible to do so. Failure to transmit employee contributions to the plan in a timely manner is considered a prohibited transaction, with substantial penalties.

7. Have all required notices been provided to employees? Safe-harbor 401(k)plans and SIMPLE plans have annual required notices to employees to encourage participation. In addition, most plans are required to provide a Summary Annual Report to employees and 401(k) plans have new quarterly disclosure requirements.

8. Have all required tax returns been filed? Unless specifically exempted, all plans have a requirement to file Form 5500 annually with both the Department of Labor and the Internal Revenue Service. Other returns may also be required.

After reviewing the compliance issues regarding your plan, you will need to pay attention to the underlying investments in your plan. Many plans still have the same investment options they started with and those options have not been reviewed since the plan was set up. Many things can change over the years that may affect the suitability of the investments you use in your plan or offer to your employees. A retirement plan should have an investment policy statement and performance of the investments should be benchmarked against that investment policy statement not less than annually.

Currently there is considerable interest by both plan participants and Congress in the fees associated with operating retirement plans. Traditionally, most employees paid the costs associated with administering their retirement plans. However, with the transition to participant directed 401(k) plans, that cost in many cases has been transferred to employees. Most plans offered today by mutual fund and insurance companies embed both the administration and record keeping costs as well as investment costs in the performance returns of the investments. Determining the few actually being charged by your provider can be challenging. Congress and the Department of Labor are working on regulations to make those few more transparent to employers and plan participants. Plan sponsors should be aware of the real costs connected with the investments they offer in their plans.

The Department of Labor and the Internal Revenue Service have tools that can help you monitor the compliance of your retirement plan operations and investments. You may want to visit the "Retirement Plans Community" at www.irs.gov for information to assist you with your retirement plan compliance. The IRS has a wealth of information for plan sponsors to help you with your retirement plan. Similarly, through harder to navigate, the Department of Labor at www.dol.gov has resources to aid you in meeting your fiduciary responsibilities. Or contact your retirement plan professional for an annual check-up.

Bruce Lahti is a Chartered Retirement Plans Specialist, an Associate Professional Member of the American Society of Pensions Professionals and Actuaries and manages the JCCS Benefit Consulting Group at the Great Falls office of JCCS.

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