5 Reasons Your Employee Benefit Plan Needs Written Plan Policies

Larry Beebe, CPA

Written policies are an essential component of any successful entity, including employee benefit plans. While they may seem complicated and onerous, clear policies are important both for compliance and operational efficiency.

You may have operated for years without a single policy, or perhaps you feel as though your plan is not large enough to warrant such structure. Regardless of your plan’s size or scope, here are five reasons to implement written plan policies:

  1. Compliance. Written policies show government regulatory agencies that your plan has rules and has tried to follow those rules; essentially, that you’ve made significant efforts to stay in compliance.
  2. Consistency. Plan policies dictate how your plan will act in a given situation. These policies help to ensure that your plan is operating within set boundaries and facilitate consistency among decisions and decision-makers.
  3. Liability. Policies aren’t just internal guidelines. They are legal documents that can help to mitigate the plan’s – and the trustees’ –liability in the case of a lawsuit.
  4. Transparency. Written policies allow all those associated with your Plan, including participants, professionals, employees and vendors, to see how it is operating.
  5. Assurance. Written policies give participants and all those associated with your Plan assurance that it is operating in accordance with well-reasoned and documented procedures.

What Policies Does My Plan Need?

Plan policies are essential for guiding not only trustees, but also plan employees and professionals in proper operational procedures. Given the complexities and compliance requirements for your benefit plan, there are a number of important policies to implement, including:

  • Investment
  • Whistleblower
  • Conflict of Interest or Fraud
  • Records Retention
  • Disaster Recovery
  • Collection
  • Travel and Educational Expense Reimbursement
  • Shared Expense

Even if you already have some (or all) of these policies in place, they are not static documents. It’s important to revisit your policies to ensure they meet your plan’s needs and compliance requirements. As each of these policies can be nuanced and there are a number of considerations for each one, we will be covering each type of policy in more detail in future posts to help you develop and/or modify the necessary policies for your plan.

While they might seem like just more documentation, plan policies are essential to protecting and guiding your plan. Work with your advisors to develop the policies and guidelines you need to direct decisions, communicate important principles, and maintain compliance.

In-depth information regarding written policies for employee benefit plans is available in Chapter 36 of the Trustees Handbook, Seventh Edition, published by the International Foundation of Employee Benefit Plans.

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