(Figure 6)
Investigation Guidelines
Part I. Background Information
Obtain the following data for the pension or welfare plan which has been selected for investigation.
Note: You need not complete the following items to the extent that the data is already in your possession; for example, on Form 5500.
A. General
Plan name _____________________________________
Plan sponsor name _____________________________
Plan administrator name _______________________
Sponsor EIN ________________ Plan number ______
Plan address ___________________________________
________________________________________________
Contact person ______________ Telephone ____________
B. Coverage (describe types and locations of employees covered by the plan)
number of participants _________
active _________
retired or separated _________
Type of Plan
Pension
defined benefit
profit sharing
stock bonus
target benefit
other money purchase
ESOP
other ________________
Welfare
health benefit
fully insured
self-funded
life insurance
other ________________
Administration
single employer
multi-employer
other ________________
total _________
C. Type of Plan
D. Contributions
Sponsor (number and types of employers, unions or other organizations contributing to plan)
_____________________________________________________
_____________________________________________________
Participants contribute ____ yes ____ no
E. Funding
____ trusteed
____ insured
____ both trusteed and insured from sponsor assets
name and location of trust fund
__________________________________________
insurance carriers and insurance vehicles
_________________________________________
_________________________________________
total plan assets $ ___________ at (date)______________
F. Plan Managers (include named fiduciaries)
Plan Managers
Name
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
Title (officer, trustee, committee member, etc.)
______________________________________
______________________________________
______________________________________
______________________________________
______________________________________
G. Service Providers (attorney, accountant, actuary, insurance agent, contract administrator, investment manager, etc.)
Service Providers
Name
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
Company
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
Type of Service
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
H. Verifications
date of most recent audit by outside auditors______________
date of most recent review by internal auditors____________
date of most recent actuarial valuation___________________
I. Plan Documents
List the basic documents, which establish and govern the plan and/or trust
____________________________________________________________
____________________________________________________________
____________________________________________________________
J. Plan Records
List the basic books and records of the plan, e.g., contribution records, participant hours/earnings/ benefits, records, investment policies, claim forms and files, bank statements, trust reports, cash books, journals, ledgers, inventories, investment reports, etc
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
K. List related plans and trusts
___________________________________________________________________
___________________________________________________________________
Part II. Review Procedures
- Fiduciary - Establishment of Plan
- Determine that the employee benefit plan has been established pursuant to a written instrument.
- Determine that the written instrument provides for one or more named fiduciaries.
- Determine that the plan
- provides a procedure for establishing and carrying out a funding policy consistent with plan objectives.
- describes any procedure for allocating responsibilities for the operation and administration of the plan.
- provides a procedure for amending the plan and for identifying the persons who have authority to amend the plan.
- specifies the basis on which payments are made to and from the plan.
- Fiduciary - Establishment of Trust
Ascertain that assets of the plan are held in trust [unless the assets are insurance contracts, are held by insurance companies or are otherwise exempted by section 403(b)]. - Fiduciary Duties
- Examine all or selected expenses paid or incurred by the plan for the last year in an attempt to identify expenses which were not incurred exclusively to provide benefits to participants and their beneficiaries or to defray reasonable plan administrative costs. Examine income and expense statements and the general ledger accounts for unusual expenses (accounts). Examine selected cash disbursements and non-cash transactions and supporting documentation for transactions, which appear unrelated to operating the plan.
- Examine administrative expenses for categories that appear unreasonably costly in relation to other similar plans.
- Explore the management of plan operations by examining whether contributions are collected timely; cash is deposited promptly; investment certificates are properly safeguarded; assets are appropriately insured; reserves and retentions held by insurance carriers are not unreasonable; tax qualified status with IRS is maintained; PBGC insurance is current.
- Analyze plan investments to ascertain extent of diversification. Consider diversification:
- among types of investments, i.e., stocks, bonds, real estate, etc.;
- within types, i.e., is common stock all of one or two companies; and
- geographical areas of investment.
Determine if investment portfolio appears to adhere to investment policy in plan instruments, minutes of meetings, etc.
- Read the basic plan documents and note substantive policy direction (other than investment policy) to the plan fiduciaries and examine if it is being followed.
- Inquire whether any plan funds are invested in assets which are beyond the reach of United States courts in contravention of section 404(b).
- Fiduciary - Co-Fiduciary Liability
Examine selected allocations of fiduciary responsibilities (other than trustee responsibilities) to both named fiduciaries and other fiduciaries, to determine if they have been allocated in accordance with the instrument under which the plan is maintained. - Fiduciary - Prohibited Transaction
- Obtain a list of parties in interest from the plan. Compare to the lists of plan sponsors, plan managers, and service providers obtained in Part I of these guidelines. Determine how plan management identifies parties in interest and how plan fiduciaries prevent inadvertent party in interest transactions from occurring.
- Inquire as to any applications for individual exemptions from prohibited transactions for the plan and their status. Compare with OED information available at RO, and clarify if necessary. Also be aware of applicable statutory and class exemptions.
- For selected sales, purchases, and lease property transactions by the plan during the period being investigated, examine property records and supporting documentation to ascertain if any of the transactions were between the plan and a party in interest.
- Examine accounts receivable, accounts payable, cash receipt records, and cash disbursement records for the period under examination in an attempt to identify any loan of money or extension of credit by the plan to or from a party in interest.
- For the period being investigated, examine expense accounts representing acquisition of goods, services or facilities by the plan. For selected transactions, ascertain whether they were acquired by the plan from a party in interest.
- Inquire as to any plan assets, which have been transferred. Ascertain whether such assets were transferred to parties in interest.
- For some of the larger and continuous transactions in which the plan engages, e.g., purchases/sales of securities, purchases/sales of properties, placing of insurance contracts, advisory and consulting fees, etc., ascertain the organizations that acted as broker, agent, consultant, etc. Determine whether any of the plan's fiduciary have had any ownership or direct involvement in these organizations, or have received any remuneration from their organizations.
- Fiduciary - Employer Securities and Real Property
Request a listing of all employer securities and properties held by the plan. Ascertain whether any such post-ERISA acquisitions have resulted in holdings by the plan of employer securities and properties in excess of 10% of total plan assets (measured on a fair market value basis). - Bonding
The Bonding Checklist and Bonding Computation Sheet will ordinarily be completed for every plan. See Figure 3. - Reporting and Disclosure
The Reporting and Disclosure Checklists and Individual Benefit Statement Compliance Checklist will ordinarily be completed for every plan. See Figure 4 and Figure 5. - Verifying Financial Data Reported
Verify the accuracy of plan financial data reported to DOL on the most recent annual report by:- Determining whether the plan is exempt from completing financial data on annual report forms and from engaging an independent qualified public accountant pursuant to DOL regulation.
- Determining for non-exempt plans that the annual report, related schedules, and accountant's opinion have been completed and reported, as appropriate.
- Verifying Assets Held by Third
Parties
If a plan fiduciary or other plan official indicates that plan assets are being held by a third party, such as an investment manager or custodian, verify that the assets exist and are in the name of the plan by contacting the third party directly. - Claims Procedures
Determine whether plan instruments and operating procedures provide for:- Prompt handling of claims from participants and beneficiaries.
- Notice in writing to participants and beneficiaries of claim denials and reasons therefore.
- Full and fair review by a named fiduciary of claim denials.