It is essential that an employer be involved in the management of the company's defined benefit pension plan, since significant assets are involved, pension laws are complex and penalties for mistakes can be substantial.
Relationship with your service provider. Develop a good relationship with your actuary. Keep in touch, at least by email. When an issue develops, try to contact the actuary directly; don't rely on the provider's non-actuarial employees for issues that may require actuarial input. Don't change service providers abruptly; even if you are certain that you need a new defined benefit plan provider. The plan should be reviewed before switching providers, since the new provider may not be amenable to correcting any problems caused by the existing one in a way you find suitable.
Your responsibilities. Notify your service provider regarding any change in the company or plan that may be significant. This includes the decision to hire an older employee, a sudden increase or decrease in plan assets and any substantial changes in expected annual compensation for key employees. Don't wait until after year-end to provide such information. Cooperate fully with furnishing your administrative service provider the annual employee and asset data as soon as possible, so the annual contribution can be determined and annual work completed without placing unnecessary stress on your provider. Be aware of the laws regarding plan investments and avoid any that may contain self-interest. Make sure each employee receives what is due him/her under the terms of the plan; not doing so can result in serious penalties. You must not let any personal feelings about what you believe you owe a terminated employee affect his/her benefit.
Plan Reviews. Try to understand, in simple terms at least, the annual reports furnished by your defined benefit plan administrative service provider. Ask for explanations, where needed.. Have the plan reviewed (at least briefly) every 5 to 10 years at a minimum by an independent actuary to ensure it meets your current needs and any deficiencies are uncovered. The quicker a problem is discovered the better. Have your investment strategy reviewed from time to time by a competent professional; your administrative service provider may be able to give you some guidance in this regard. If you need an independent investment advisor, try to keep investment expenses as low as possible.
If you have a defined benefit pension plan and want to help ensure it is serviced properly, please call us at 718-793-9885 or complete our short Defined Benefit Pension Plan Questionnaire. We will show you how you can accomplish this. .