Administration Operations Only
Routine Administration and Compliance
Certain administrative functions are applicable to every retirement or deferred compensation plan, regardless of type, features or choice of investment approaches. Spectrum performs these functions on a routine basis. They include some or all of:
- periodically requesting and obtaining current employee and payroll data;
- editing of all source data (changes reconciled and unexpected variances or suspected errors flagged and reported);
- determination of eligible employees based on plan provisions and employer payroll records; processing new participant's enrollment elections, as applicable, under automatic enrollment provisions; accumulation and maintenance of all data needed to maintain individual accounts or benefit entitlements, provide management information and satisfy legal requirements.
- crediting individual employee and employer matching contributions to participants' accounts in accordance with plan provisions and participants' individual elections;
- maintenance of multiple investment fund accounts by each separate source, including employee and employer contributions, rollovers and elective deferrals;
- calculation of employer's plan contributions based on the combination of employer wishes and legal limits on the amounts of compensation, contributions and benefits;
- determination of the plan's 'Top Heavy' status and completion of 410(b) 'Minimum Coverage Test', in accordance with applicable federal regulations;
- performance of applicable non-discrimination testing;
- allocation of employer contributions and, if applicable, forfeitures, to the accounts of individual participants, in accordance with applicable plan provisions;
- allocation of investment gains and/or losses to individual participant's accounts;
- preparation of Summary Annual Reports, as required by Section 403 of the Employee retirement Income Security Act of 1974;
- verification of employer and employee contributions based on employer confirmations and moneys received by the plan trustee(s);
- preparation of comprehensive plan quarterly and/or annual reports, detailing all aspects of plan operation, including changes in participation, compliance with legal requirements, financial statements, and investments;
- preparation of Annual Return of Employee Benefit Plan (IRS Form 5500) and related schedules and all other legally required reports and governmental filings, including 1099Rs, unless provided by others;
- preparation of quarterly and/or annual individual participant benefit statements detailing changes in accounts, including contributions, investment gains and losses, account balances, accrued benefits and vested status;
- calculation of benefit for terminated participants and preparation of statements of termination benefits;
- calculation of alternative benefit entitlements and production of statements of retirement benefits for retiring participants;
- processing distributions to terminated and retired participants, in accordance with their elections; and
- where applicable, provision of data to auditors for annual plan audits.
In addition, as a standard part of its services, Spectrum meets with each client annually or, if appropriate, on a semi-annual or quarterly basis, depending on each client's situation. These meetings are held in order to discuss:
- management reporting and deliverables
- changes in client circumstances
- business trends
- proposed or final regulatory changes
- anticipated or enacted changes in legislation
Individual Participant Record Keeping
Spectrum maintains individual records of account for every plan participant, contribution source, and investment fund. This includes maintenance of participant elections and changes, execution of participant directions, where applicable, and reconciliation of investment transactions. When providing Administration Operations Only, Spectrum engages with clients under one of two record keeping arrangements:
- Balance-forward record keeping, applicable to plans for which assets are valued and reported, generally on an annual basis. Trustees may directly manage the assets collectively and/or participants may direct some portion of their investments through brokerage accounts in the custody of regulated financial institutions.
- Alliance record keeping, where participant records are maintained by a separate organization. These may include investment management companies, insurance carriers, or independent record keepers unaffiliated with Spectrum.
Specialized Administration and Compliance
Specialized administration and compliance may be required at the option of the employer, because of employer and/or trustee action or inaction; and/or because of alternative investment approaches selected by the employer and/or trustee(s). Certain plan types, such as Defined Benefit Plans and Employee Stock Ownership Plans also require administration functions in addition to those functions applicable to all plans.
- Audit Support. Spectrum will collaborate with independent qualified public accountants to assist with completion of audits, as required.
- Brokerage Account Maintenance. Spectrum may assist employers and their participants in the origination, maintenance, and closure of individual brokerage accounts.
- Compliance Resolution. In cases where Spectrum is retained to assume responsibilities for an existing plan, and discovers compliance failures or is retained as a result of the prior discovery of such failures, Spectrum, in conjunction with a plan’s legal counsel, will analyze the situation, reconcile or reconstruct the records of a plan’s operation and prepare submissions to the relevant agencies under such agencies’ published correction programs.
- Custom Reporting. Development and provision of customized reports and schedules at client’s or trustee’s request.
- Data Entry. Spectrum will receive payroll, demographic, and other data in whatever format is convenient to clients. Spectrum will provide data entry services when the format of such data provided by client cannot be imported electronically into technology platforms.
- Fee Reporting. Certain fee information needs to be reported on schedules to your Form 5500 if you have more than 100 participants. Spectrum will provide that information as part of our preparation of those schedules. If you need additional information regarding our compensation to meet any reporting or disclosure obligations, please send us a written request stating the information you require and the applicable compliance deadline and we will provide you with the necessary information sufficiently in advance to permit you to meet your deadline.
- Multiple Contribution Scenarios. Calculating and analyzing multiple employer contribution scenarios, in order to provide a range of alternatives for budget and planning purposes.
- Other Services. Other non-routine plan management or specialized administration services as may be periodically requested by clients or trustees.
- Regulatory Agency Representation. From time to time, either the Internal Revenue Service or the U. S. Department of Labor may request additional information or clarification in relation to Form 5500 and related schedules or Form 945. These agencies may also conduct regulatory audits of plans. Such audits may be completely random or may be triggered by plan and employer characteristics. In such cases, Spectrum will represent clients in providing information and data, liaising with agency personnel to clarify information, and/or provide analyses to support the client’s position. For defined benefit plans, such representation may also be necessary in dealings with the federal Pension Benefit Guaranty Corporation (PBGC).
- Specialized Government Reporting. Preparation and filing of specialized government forms, including Form 5558, Form 5330, Form 945, and others as applicable.
- Transition Management. Spectrum can support employers through plan transitions and service provider changes. Spectrum will coordinate with the relevant providers, develop the timeline, request and exchange data as required, and prepare the relevant deliverables.
Employee Stock Ownership Plans Specialized Administration and Compliance
Certain Specialized Administration and Compliance services apply to Employee Stock Ownership Plans. These services include some or all of the following:
- confirming and documenting that valuation and revaluation of non-listed employer securities is made in accordance with applicable federal requirements;
- updating participant records to reflect revaluation of shares in non-listed employer securities;
- production of information and proxy forms for pass-through voting of shares;
- determination of eligibility for special ESOP diversification elections;
- preparation of ESOP diversification information and individual illustrations;
- processing participants’ diversification elections; and
- verifying share redemption in accordance with participant diversification elections and allocation of proceeds in accordance with such elections.
Defined Benefit Plans Specialized Administration and Compliance
Certain Specialized Administration and Compliance services apply exclusively to defined benefit pension plans, including cash balance plans. These services include some or all of the following:
- production of individual illustrations of accrued and projected benefits;
- calculation of spouse’s pensions to be paid on a participant’s death, either during employment or after termination or retirement;
- notification of upcoming eligibility for benefits such as early or normal retirement benefits;
- production of data for renewal of insured ancillary benefits such as death (lump sum) benefits or survivor income benefits;
- calculation of maximum benefit limits applicable to each eligible participant;
- annual actuarial valuations to determine accrued and projected plan liabilities, funded status, and amounts of employer contribution required to satisfy minimum funding standards;
- preparation and filing of Form 5500, Schedule B, with certification by an Enrolled Actuary, as required under the provisions of ERISA;
- calculation of premiums due to the Pension Benefit Guaranty Corporation, as applicable; and
- liaison with auditors and provision of data for plan and company financial reporting, including, as applicable, SFAS Numbers 35, 87, 88, 106 and 112 disclosure information.
Participant Account Transactions
Plans may make available to participants a broad range of features and services available within their accounts. Spectrum’s services include:
- Hardship Withdrawals. Processing hardship withdrawal requests and initiating distribution of proceeds.
- In-service Distributions. Processing elective and mandated in-service distributions for participants, in accordance with plan provisions.
- Participant Loan Maintenance and Reporting. Verification of loan payments, documentation of repayment components, allocation to participants’ accounts in accordance with elections, and preparation of loan schedules for employer and trustee reporting purposes.
- Participant Loan Origination. Preparation of loan illustrations, amortization schedules, loan origination documentation, distribution of loan proceeds and instructions for loan repayments.
- QDRO Processing. Preparation of documentation in relation to Domestic Relations Orders issued by State courts in the case of marital dissolutions, including responses to orders, segregation of plan assets, and creation of spousal accounts or processing distributions.
- Rollover Contributions. Processing incoming rollover contributions, including if applicable, investment elections.
- Termination Distributions. Processing terminations, including preparation of Statements of Termination Benefits, preparation and distribution of election forms, following up to obtain elections, and processing distributions.
Trust accounting is a key component of plan management and operation. The by-product of the trust accounting function is the preparation of financial statements for the plan and trust. These include balance sheets, income statements, and reconciliation of contributions, earnings, other income, expenses, assets, and liabilities. The accounting function for a plan is similar to that required for a business, except that the accounting for assets can involve a wide variety of investment approaches and different kinds of investments.
Retirement plan accounting involves reconciliation of individual participants’ plan accounts and sub-accounts with the total assets held in trust. The accounting effort is highly dependent on the number of individual accounts and sub accounts for each participant, as well as the total number of different investments. The complexity increases when individual participants are allowed to select investments from different investment organizations or through multiple investment service providers.
Trust accounting also provides information that is required for governmental reporting and disclosure, as part of the annual Form 5500 filing process. It also furnishes information required for Independent Qualified Plan Audits, where required by law, in the case of plans with 100 or more participants.
Spectrum provides trust accounting services for all plans where Routine Administration and Compliance services are provided or as requested by client.
Document and Records Management
Spectrum provides copies of all final reports to Client. As a result, Spectrum’s copies are for its records only, and are not intended to substitute for the maintenance of Plan files by the Plan Sponsor and Plan Administrator. Spectrum may maintain files as it deems appropriate as required by law or, as applicable, standards of professional conduct. After that time, Spectrum may, at its sole discretion, destroy such records. Clients may request a copy of any and all documents and records retained by Spectrum, except Spectrum’s proprietary work papers, and Spectrum will comply with such request to the extent such items exist upon payment by Client of the necessary administrative costs to do so.
Plan and Trust Documents
All retirement and deferred compensation plans must be written and must contain provisions that comply with the requirements of applicable governing legislation and regulations. Plan documents may be based on pre-approved ‘prototypes’ or ‘volume submitter’ instruments or, in some cases may be ‘individually designed.’ For smaller organizations, prototype and volume submitter documents offer significant economies of scale. However, it is important to know that certain types of plans must be individually designed and, depending on employer circumstances and characteristics, prototype or volume submitter documents may not be appropriate. This is a subject for discussion with client’s legal counsel.
Spectrum makes available and prepares pre-approved plan and trust documents for most types of plans, for the convenience of clients and review by their legal counsel. Spectrum also monitors plan activity and changes in legislation or regulations mandating changes to plan documents. When employer circumstances or changes in law warrant amendments to plan documents, Spectrum provides plan amendments or restatements for review by client’s legal counsel and execution by clients and trustees.
As a part of its document management service, Spectrum also prepares ancillary documents, Summary Plan Descriptions, and a comprehensive administration manual.
Spectrum maintains complete copies of all plan records, including plan and trust documents; employee census and contribution records; enrollment and distribution documentation; asset statements; trust statements; reports and correspondence; and participant records. Copies of documents and reports are routinely provided to clients for their own files. Most documents and records for current clients are maintained for at least ten years.
Document and Records Retention
During the course of Spectrum’s engagement by clients, Spectrum will routinely produce drafts of work papers and reports before producing final versions. Spectrum does not generally retain drafts of work papers or reports after final copies are produced. For inactive clients, all final records will be retained for a period of seven years, as required by law or, as applicable, standards of professional conduct. After that time, Spectrum may, at its sole discretion, destroy such records. Inactive clients are defined as those for whom Spectrum has not provided any services for a period of 18 or more months. Inactive clients may request complete copies of all documents and records retained by Spectrum, except Spectrum’s proprietary work papers, within seven years of the date that Spectrum last provided any services to such client. Spectrum will comply with such requests, provided the client agrees to reimburse for the necessary administrative costs that may be involved.
Most retirement and/or deferred compensation plans may be terminated at the discretion of the sponsoring employer. Exceptions apply in the cases of multiemployer plans, subject to collective bargaining, and plans adopted because of contractual obligations. When an employer elects to terminate a plan, a process will provide protection for the employer and trustee in the event of any subsequent regulatory audit. This process involves making an application to the IRS for a determination that the plan, as constituted and operated, qualifies under applicable law for tax relief. Such an application is not required by law but is, in the opinion of many experts, highly advisable. Spectrum will prepare the application along with accompanying documentation and submit it to the IRS.
Additional services Spectrum provides in the event of plan terminations include:
- preparation of final trust and plan accounts covering the period from the last Plan Year End to the date of plan termination;
- production of final participants’ statements;
- production of final (complete or partial year) financial reports;
- preparation of all governmental reports and filings;
- preparation of participant election packages for distributions;
- preparation of distributions, in accordance with participant elections, including any applicable withholding; and
- liaison with regulatory agencies, accountants, auditors and legal counsel, as required or requested.