403(b) Plan Fiduciaries Ordered to Restore Assets to Plan
A mental health services provider, with its tax-exempt status revoked, was sued by the DOL for failing to remit employee contributions to the retirement plan and a health benefits plan.
The U.S. District Court for the Southern District of Ohio issued a consent order and judgment requiring the fiduciaries of Day-Mont Behavioral Health Care Inc. to restore $141,666 to the defunct Dayton, Ohio-based company’s employee benefit health and retirement plans.
Data shows the organization’s exempt status was automatically revoked by the IRS for failure to file a Form 990, 990-EZ, 990-N, or 990-PF for three consecutive years. The mental health services provider ceased operations in 2018.
An investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) found that fiduciaries Gayle Johnson, Akil Sharif and Day-Mont Behavioral Health Care Inc. violated the Employee Retirement Income Security Act (ERISA) by failing to remit employee contributions the plans.
Under the terms of the consent order and judgment, the fiduciaries will restore $64,582 to the Day-Mont West Tax-Deferred Annuity Plan. These monies are due to any individuals who were plan participants from January 13, 2012, through August 5, 2016. The fiduciaries will restore these monies to employees who had voluntary employee contributions withheld from their pay that the company failed to remit to the annuity plan, or did not remit in a timely manner.
Additionally, the fiduciaries will remit $77,084 to the participants of the Day-Mont Behavioral Health Care Inc. Employee Benefit Plan—a health benefits plan. The fiduciaries will also pay a civil money penalty of $28,333 for willful violations of ERISA.
The court has permanently enjoined both Johnson and Sharif from acting as service providers or fiduciaries to any ERISA-covered plan in the future. AMI Benefit Plan Administrators Inc., of Youngstown, Ohio, will serve as the independent fiduciary to allocate and distribute the recovered funds.
Better Retirement Income Strategies Start With Deeper Insight
To build a more effective set of solutions for the spending down of retirement plan assets, plan sponsors must first come to understand what their participants are doing today.
In a recent conversation with PLANSPONSOR, Peg Knox, chief operating officer of the Defined Contribution Institutional Investment Association (DCIIA), highlighted a new series of white papers her organization has published on the topic of building a better “retirement tier.”
By “retirement tier,” Knox and DCIIA are referring to a range of products, solutions, tools and services, all designed in coordination to allow a defined contribution (DC) plan sponsor to broaden the plan’s goal from one wholly focused on savings to one that also accommodates and supports participants who are near, entering, or in retirement.
Knox said she is particularly proud of the actionable items included in the white paper series, such as a set of form letters plan sponsors can send to their recordkeepers to start generating useful information about retirees’ and near-retirees’ behaviors. DCIIA has also put together a downloadable set of data spreadsheets that plan sponsors can hand directly to their recordkeepers to learn the key information that is needed to build the retirement tier. According to DCIIA, these spreadsheets can be used to generate a “money out” report, a withdrawal options review, and a plan demographics review.
According to Knox, plan sponsors looking to build a retirement tier can start in one of two places.
“Some plan sponsors will want to start by reviewing the options and services that are currently part of their plan to understand how, and to what degree, they already support the retirement tier concept,” Knox explained. “Others may choose to begin by looking at the bigger picture, broadly defining objectives for how to best serve this group of participants who are near, at, and in retirement.”
To be successful in this area, ultimately plan sponsors will need to do both, at least to some degree.
“Just analyzing what your participants are doing can be so informative,” Knox said. “Even if you only offer a lump sum today, it’s still important to know whether your plan population is rolling into an IRA or whether they are cashing out. This is the foundation you can use to make decision about the retirement tier.”
Knox advised that, from the very beginning, plan sponsors need to decide if they even want retirees in their plan.
“It’s going to come down to every individual employer as matter of philosophy and practicality,” Knox said. “Increasingly, I think, most large plan sponsors want employees to stay, but I don’t know if all of them feel like they should be advertising this to participants. Some sponsors consciously choose to be more neutral about what retirees should do, even though they understand the benefits of keeping people in the plan.”
DCIIA’s white papers urge plan sponsors to re-evaluate their plan’s documents through the lens of participants nearing the end of their active working years, specifically its distribution or “money out” options, to see how the plan’s near-retirees and retirees can access their money.
As Knox explained, part of assessing the money out options is to evaluate how participants’ money can leave the plan in the first place. Another key step is to evaluate a plan’s demographics, to see not only how many participants might benefit from a retirement tier’s offerings, but also how near to retirement many of them are, and to take a macro look at the company’s recent retirement patterns.
“Again, much of this work can be generated by your service providers and should not require extensive heavy lifting on the plan sponsor’s behalf,” Knox said.
In terms of questions sponsors should ask of themselves, the following should be considered, according to DCIIA: “Whom do you want your plan’s retirement tier to help, and why? Do you want to encourage participants who separate from service due to retirement to stay in the plan? How much time and expense do you really want to focus on the tier? Are you open to helping participants, and their spouses, beyond just offering liquid investment options? For example, are you open to advice solutions? Are you open to products with guarantees? Are you open to adding a periodic withdrawal service?”
Only once a plan sponsor has determined what they want their role to be in helping participants who are near and/or in retirement can the employer move on to identifying what additional products, tools or services should be a part of the plan’s retirement tier.
“There is no one option that will meet the needs of every participant in this cohort, since participants’ needs vary greatly in retirement,” Knox warned.
By starting with existing service providers, Knox explained, a sponsor may identify relatively easy initial steps to take—as simple as leveraging tools and products that your service providers already offer. From here, a plan sponsor might reasonably do a gap analysis of what further options and services to add to the plan’s retirement tier, compared with what can already be leveraged from those offered by existing service providers.