JUNE 2006 Pension Plan tip of the month...

Who are the people in your Qualified Retirement plan?

A qualified plan can have many forms and facets, but each has certain requirements and guidelines it must

follow and each must be intended to allow participants and employers to save for their retirement in a tax

deferred manner.

Employers sponsor Qualified Retirement Plans with a number of goals in mind:

to attract and retain the best possible employees

to help employees save for their retirement,

to help owners and key employees plan for their futures,

to help the company and participants save on certain taxes.

In order for a Retirement Plan to meet these goals and many others, a diverse group of people and organizations

must each perform their role while working together. Some of the key “players” in a retirement plan are:

Participant: For reporting purposes, a participant is someone who has a balance in a qualified plan or is eligible

to participate in a qualified plan, whether or not they contribute. A qualified plan and its assets are by law meant to

be for the exclusive benefit of its participants. Essentially, the plan owes its existence to its participants.

Plan Sponsor: An employer or group of employers sponsoring a qualified plan. Just as a plan cannot exist without

participants, it cannot exist without a plan sponsor.

Beneficiary: This is the person designated by a participant or by the plan who may become entitled to a plan benefit

upon the death of the participant or due to a Qualified Domestic Relations Order stemming from a divorce. A

beneficiary retains many of the rights of a participant.

Trustee: A trustee has authority to control and manage the assets as well as the operation of the entire plan. It is

their duty to act in the best interests of the Plan and its participants and beneficiaries.

Plan Administrator: May also be a plan trustee, but is typically an employee of the Plan Sponsor designated by plan

trustees to handle the day to day operation of the plan within the company. It is the administrator who most often will

talk to participants and refer their questions to the plan’s financial advisor or third party administrator.

Record keeper: Chosen by Trustees, this is generally an organization designated to maintain accounts and reconcile

plan assets on a continual basis. It is the record keeper who is responsible for producing participant statements

and processing participant distributions or transfers as well as other transactions.

Financial Advisor: A licensed professional chosen by the trustees of the plan.  They advise employers on investment

choices as well as plan design and implementation.  This process typically includes identifying the proper service

providers to assist the Plan Sponsor with the operation of the plan.  A financial advisor also provides employee education

and may help participants make investment choices.

Fiduciary: Anyone who can exercise discretionary authority respecting the management of a plan. This person can

move funds, give advice regarding fund choices, or can enact transactions on behalf of the plan. This definition could

apply to anyone from a plan’s trustees to its financial advisor or record keeper.

Third Party Administrator: This group or individual assists the Trustee(s) and Plan Administrator in making decisions

on the appropriate plan design, typically prepares all the plan’s legal documents and assists you with any questions

that you may have in regards to the operation of your plan.  They produce the forms and schedules required to be filed

with the IRS on an annual basis. A “TPA” also helps trustees maintain the plan’s legal framework or document and

performs required testing of plan contributions and assets to help the plan maintain it’s qualified or tax deferred status.

A successful plan integrates the skills of all the above parties as they all work together in providing a valuable retirement

benefit for the eligible employees of the Plan Sponsor.  In this process it is imperative that the plan operates in accordance

with all the regulations as established by the IRS and DOL.