Getting Correct Information from Plan Sponsor Clients

Retirement plan advisers and third-party administrators (TPAs) are likely to find information gaps when performing assessments of retirement plan census data or client ownership data, according to Natalie Wyatt at Innovest.

In addition to plan sponsor oversights and lack of knowledge, information gaps can happen when there has been an acquisition, sale, or divesting of a plan sponsor’s business, says Wyatt, senior sales representative with Innovest, which provides technology services to trust, wealth management and retirement professionals. Information integrity can also be compromised during a change in officers or ownership of the business, or during a partial plan termination.

Wyatt addressed the topic during a session at the 2014 American Society of Pension Professionals and Actuaries (ASPPA) Annual Conference. She reminded attendees that recent changes to the Defense of Marriage Act (DOMA) require plan sponsors to revisit employee data. 

Plan advisers may be responsible for coordinating the submission of employee census data to retirement plan advisers. Common errors to watch for include:

  • Date of hire – Was the employee hired for a part-time or full-time position? Is the employee a rehire with prior dates of service?
  • Date of termination – Did the employee go from full-time to part-time, transfer to another division, or really terminate?
  • Contract labor – The Department of Labor (DOL) keeps an eye out for employees that are misclassified as contractors.
  • Hours worked – Does the plan sponsor know how to properly calculate hours worked for eligibility and participation?
  • Compensation – Is the plan sponsor submitting the correct compensation per the definition in the plan? There could be a different definition of compensation in the plan for different things, such as allocating contributions or forfeitures and key employee or highly compensated employee for top heavy and nondiscrimination testing purposes.

Wyatt suggested plan advisers establish a checklist for information they need and errors to look out for, and have a process in place for all staff to use when coordinating data from plan sponsors to plan providers.

One of the best ways to motivate plan sponsors to ensure data is correct is the fear factor, she says. “Let them know what happens if regulators find an error due to incorrect information.”

Advisers and third-party administrators (TPAs) are not required to educate plan sponsors about how to determine the correct information, but if they have good communications with and can educate plan sponsors, they can ensure they receive good information, Wyatt noted.

To educate and remind plan sponsors about providing good census and ownership information, Wyatt suggested using the seven learning styles. Advisers and TPAs can’t always figure out a plan sponsor’s learning style, so apply several styles to communications.

Learning styles and strategies include:

  • Visual learning style uses pictures, images, spatial understanding – Advisers and TPAs can use power point demonstrations, web demonstrations, or activities in which plan sponsors can test a process for submitting information;
  • Auditory learning style uses sound and music – Adviser and TPAs can use lectures, information sessions, and plan sponsor discussions and meetings to educate and remind plan sponsors about submitting information;
  • Linguistic learning styles use words in speech and writing – Articles, alerts, emails and memos can educate and remind plan sponsors;
  • Physical learning styles use your body, hands, and sense of touch – Advisers and TPAs can use hands-on interactions to demonstrate processes and methods that require plan sponsors to take action;
  • Logical learning styles use logic, reasoning and systems – Let plan sponsors know why providing the correct information is important;
  • Social learning styles use groups and other people – Advisers and TPAs can hold meetings with a group of plan sponsors to demonstrate how to calculate and provide correct information; and
  • Solitary learning styles include working alone and self-study – Videos and training modules can give plan sponsors a sense of control.

To get correct information, advisers and TPAs will need to communicate with each other; the human resources staff at the plan sponsor; the plan sponsor’s payroll provider, certified public accountant (CPA) or attorney; and the plan sponsors themselves.

Wyatt noted that if plan sponsors outsource the HR or payroll functions, it can be a challenge to get correct census information because outsourced providers typically provide a standard set of information and only provide gross income for participants. It could cause extra work for advisers and TPAs, and this should be documented in service agreements.

When working with payroll departments or providers, advisers and TPAs can help set up processes to make sure they will get correct information.  In addition, Wyatt said, there are software providers that offer online solutions to help plan sponsors gather census data.

In addition, setting up a calendar of reminders to send plan sponsors can help, such as a reminder at the beginning of December about what the plan definition of compensation is, or asking plan sponsors in January whether they had any rehires in the past year.  

A conference attendee from Unified Trust said the company spends a good amount of time onboarding clients, determining the proper definition of compensation, looking at what the payroll vendor is providing in its files, making sure plan sponsors check and update information with each payroll file.

Wyatt suggested plan advisers and TPAs get employers to sign a statement that data they provided is accurate. In addition, she said advisers and TPAs may sometimes need to harass non-responsive employers to provide data. If clients continue to be non-responsive, it may be time to discontinue the relationship, she added.