Over the years many words have been written about what Plan Sponsors of Qualified Retirement Plans must do to comply with a rapidly changing regulatory environment. As the economic climate has changed, the focus has shifted to the Trust Asset side of the page. There are new regulations to adhere to plus increased fiduciary standards for Trustees to consider. The following is a list of major trust activities where the MJ Consulting Group, Inc. Strategic Partnerships can provide experienced assistance.

(1) INVESTMENT POLICY STATEMENTS (IPS) - According to the Employee Retirement Income and Security Act of 1974, (ERISA) as amended, all qualified plan trustees have a special responsibility to “prudently” manage their plan assets for the sole benefit of the plan participants. ERISA and the Department of Labor have established the following prudent procedures for plan trustees:

• An investment policy must be established;
• Plan assets must be diversified;
• Investment decisions must be made with the skill and care of a prudent expert;
• Prohibited transactions must be avoided.

The Pension Protection Act 2006 also requires that administrators of all defined benefit plans subject to Title IV of ERISA (PBGC covered plans) must provide an annual notice to each plan participant and beneficiary that includes a summary statement of the plan's IPS effective with the 2008 plan year.

When auditing an ERISA plan, the U.S. Department of Labor regularly asks to review the associated IPS. The rationale for this request is in the Department of Labor Interpretive Bulletin 29 CFP 2509.94-2 which references ERISA Sections 404(a)(1)(A) and 404(a)(1)(B), specifically stating, “The maintenance by an employee benefit plan of a statement of investment policy designed to further the purposes of the plan and its funding policy is consistent with the fiduciary obligations set forth in ERISA Section 404(a)(1)(A) and (B).

In addition to satisfying ERISA regulatory requirements an IPS also can help trustees communicate a plan’s investment guidelines and procedures to those assisting in the investment process, such as investment advisors or money managers.

Most importantly, an IPS provides a guide for making future investment decisions by compelling the trustees to be more disciplined and systematic, which in itself should improve the odds of meeting the investment goals. The absence of written policy reduces decision making to an individual event basis, and often leads to chasing short-term opportunities that may detract from reaching long-term goals. By contrast the presence of a written policy encourages all parties to maintain their focus on the long-term nature of the investment process, especially during turbulent, or exuberant, times.

The preparation of Investment Policy Statements and Trust Asset Management are coordinated by our Trust Consultant - Dennis Kunisaki. Mr. Kunisaki has been involved in the Trust area since 1979 most recently with U.S. Trust - Bank Of America. He holds designations as a Certified Financial Planner (CFP) through the College Of Financial Planning and a Certified Retirement Services Professional (CRSP) through the Institute Of Certified Bankers. During his career he has dealt with ERISA clients with total assets in excess of $3 Billion.

(3) ASSET ADMINISTRATION - Reconcile the trust assets with prior years to ensure continuity, establish earnings/loss amounts, review asset valuations, ensure proper titling of trust assets, ensure compliance with ERISA rules regarding prohibited transactions, corporate actions and other investment related issues. Trust reconciliation is required for each trust prior to any actuarial valuation/certification (as required) or Annual Plan Administration Services.

(4) ERISA/PENSION BONDS - Provide services to determine qualified/non-qualified asset values and ensure compliance with current bonding regulations.

Who must be bonded under ERISA? A plan fiduciary and, in general, any other person who handles plan assets must be the subject of a bond which protects the plan assets against theft or other misappropriation. A domestic trust or insurance company with capital and surplus in excess of $1,000,000 and subject to Federal or State supervision need not supply a bond. Moreover, no bond may be required if the plan benefits are completely unfunded, i.e., payable only from the general assets of an employer. The face amount of the bond must not be less than 10% of the funds handled but not less than $1,000 nor, in general, more than $500,000. The bond must protect the plan against loss by reason of acts of any direct or indirect fraud and dishonesty on the part of the fiduciary or the person handling the plan assets, alone or in conjunction with any other person.

(5) FIDUCIARY SERVICES - Having a Plan Sponsor die or become disabled without any provisions for continuing Plan Administration and Trusteeship can present extreme problems, such as benefits cannot be paid, regulatory and compliance activities cease which could lead to plan disqualification and fines or penalties. The answer is to have a succession plan in place which might involve professional fiduciary and successor trustee services.

One of our Strategic Partners is the Nicholas L. Saakvitne. A Law Corporation which provides ERISA fiduciary and related pension law services. They act as ERISA Plan Administrator and/or Trustee for more than 90 employee benefit plans at any point in time, many of which are "orphans plans"  (the plan sponsor is no longer in business). His office has coordinated tens of thousands of benefit distributions; the cumulative total of plan assets for which he has had fiduciary responsibility exceeds $1 billion.