Distribution planning is one of the most important components of the planning process. Even if you had a detailed plan in place when you established your plan, chances are that things have changed. You should perform a distribution analysis annually. Here are some things to consider:

• Documentation and Due Diligence – Ensure best practices of documentation and due diligence are taking place for all fiduciary decisions to demonstrate that decisions are being made with the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the plan.
  
  
  • Plan Expenses – Review the Plan Expenses to ensure that fees charged by service providers, attorneys, valuation firms, etc. are reasonable.
    
    
  • Service Agreements – Review service agreements to ensure the allocation of liability and indemnification rights between the plan sponsor and service providers is clear.
    
    
• Compliance with ERISA Section 404(c) – Review Plan Documents and Disclosures, administration policies and procedures, and quality control processes to ensure full compliance with ERISA Section 404(c).
  
  
  • Administrative Policies and Procedures – Make sure that the possibility of administrative errors is minimized and that participant directions are promptly processed and implemented. Make changes to the plan document, SPD, and administrative forms and processes as needed.
    
    
  • Investment Policies and Procedures – Review investment policies and procedures to make sure that the investment options are prudent. Consider providing access to investment advisors when appropriate.
    
    
• Claims Procedures – Treat challenges to plan administration and investment errors as claims for benefits under the plan. Denial of benefit claims under ERISA Section 502(a)(1)(B) require the participant to first exhaust administrative remedies and give the plan the opportunity to review the claim and either grant the claim or potentially put the plan in a better position to defend itself if the claim is denied and later litigated.
  
  
• Fiduciary Liability Insurance and Training – Make sure you have adequate Fiduciary Liability Insurance for all plan fiduciaries and that the coverage is non-wasting. Provide training to fiduciaries on an ongoing basis about their fiduciary exposure and ways to minimize their risk.
  

For more information on the case itself, check out the LaRue v. DeWolff, Boberg & Assoc. Inc., No. 06-856 (Feb. 20, 2008) information page and related links.

Most 401(k) plan sponsors have become accustomed to performing a due diligence review of plan expenses every one to five years. This review is done primarily because ERISA provides that qualified retirement plans are solely for the benefit of the participants and that plan expenses must be reasonable. The review also helps ensure that fees as well as the supplementary tools provided are competitive with the marketplace.

Federal Judge Allows Ford ESOP Suit to Move Forward discusses how In re Ford Motor Co. ERISA Litigation, No. 06-11718 (E.D. Mich. December 22, 2008) modified In re Ford Motor Co. ERISA Litigation, No. 06-11718 (E.D. Mich. March 31, 2008) and denied the defendants' motion to dismiss the case on grounds that they committed no fiduciary breach under ERISA because the plan is required to be invested in company stock:

Last week we discussed the importance of making sure your plan been amended for changes in legislation in ESOP Planning 2008: Plan Documents and Disclosures. One of the major pieces of Employee Benefits Legislation enacted in 2008 is the HEART Act. Some of the changes were retroactive to 2007 and others are effective January 1, 2009, so you will need to make sure you are complying with the new regulations, determine if any retroactive adjustments need to be made, and ensure that the rules are properly applied going forward. An amendment must be adopted by the end of the 2010 plan year.

We noted in our recent ERISA Fidelity Bonding discussion that fiduciary liability insurance does not satisfy the fidelity bonding requirements. This was reiterated in Field Assistance Bulletin No. 2008-04 – EBSA issues guidance on fidelity bonding for employee benefit plans. FIDUCIARY LIABILITY INSURANCE: A Risk Management Tool for Fiduciaries in a New Retirement Plan Environment discusses what fiduciary liability insurance provides:

The Worker, Retiree, and Employer Recovery Act of 2008 (WRERA)

One of your most important responsibilities is to ensure that your plan documents are updated as required by law and are consistent with the way the plan is actually being administered. Plan documents include, but are not limited to, the plan document, trust document, summary plan description (SPD), and loan documents. While your review of the plan documents should be an ongoing process, you generally need to make sure that any amendments or restatements are executed by the last day of the plan year if you intend for them to be effective for that plan year. You should start by answering the following questions and using your answers as a starting point to a discussion with your ESOP counsel and ESOP advisor:

Chronological Summary of Major Post-ERISA Benefit Legislation provides a summary of the major employee benefits legislation since ERISA:

• Is the Bankruptcy Filing a Chapter 11 Reorganization or a Chapter 7 Liquidation? When many people think of bankruptcy, they automatically think of a Chapter 7 liquidation. In a Chapter 11 Reorganization, the company will generally continue to exist. Companies that are considered to be Chapter 11 success stories include Texaco, Continental Airlines, Southland Company (7-Eleven), Macy's, and Toys-R-Us.
  
  
• Pension benefits are protected in bankruptcy by the Employee Retirement Income Security Act of 1974 (ERISA). The Department of Labor (DOL) has a guide that provides additional information about how a bankruptcy will affect your benefits: Fact Sheet: Your Employer's Bankruptcy - How Will It Affect Your Employee Benefits?
  
  Workers in bankruptcy situations face two important issues when it comes to their retirement benefits: access to pension benefits and the continued safety of their pension assets. Generally, your pension assets should not be at risk when a business declares bankruptcy, because ERISA requires that promised pension benefits be adequately funded and that pension monies be kept separate from an employer's business assets and held in trust or invested in an insurance contract. Thus, if an employer declares bankruptcy, the retirement funds should be secure from the company's creditors. In addition, plan fiduciaries must comply with the ERISA provisions that prohibit the mismanagement and abuse of plan assets. If contributions to a plan have been withheld from your pay, you may want to confirm that the amounts deducted have been forwarded to the plan's trust or insurance contract.
  
  
• The Fact Sheet also discusses how insurance for defined benefit plans (including pension and cash balance plans) is provided by the Pension Benefit Guaranty Corporation.
  

  In addition, some pension benefits may be insured by the Federal Government. Traditional plans (defined benefit plans) are protected by the Pension Benefit Guaranty Corporation (PBGC), a Federal Government corporation. If a plan is terminated because an employer has financial difficulty and cannot fund the plan, and the plan does not have enough money to pay the promised benefits, the PBGC will assume responsibility for the plan. The PBGC pays benefits after termination up to a certain maximum guaranteed amount. On the other hand, defined contribution plans, such as 401(k) plans, are not insured by the PBGC.
  

Yesterday I shared a 2008 End of Year Checklist. Here are links to two other checklists. I will share further analysis in subsequent posts, including the next ESOP Planning 2008 installment: ESOP Planning 2008: Plan Documents and Disclosures

2008 End of Year Plan Sponsor "To Do" Lists provides a checklist of items for plan sponsors to address by the end of the year. If you have a different plan year, some of the due dates will be different.

The December 15, 2008 Employee Ownership Update is online and discusses the following:

Earlier today we discussed a survey from the Institute for Corporate Productivity Inc. Businesses Say Theft by Their Workers Is Up provides further analysis, noting that the most trusted employees often commit the crimes and blaming the current economic conditions:

A recent press release announced the results of a survey that found that the current economic downturn has led to an increase in employee theft, especially in large organizations. To address the theft, companies are increasing their communication to employees, conducting additional audits, and putting more emphasis on background checks prior to hiring new employees. Here is the press release:

The annual employee stock ownership plan (ESOP) allocation process involves many different parties as well as different moving parts. In order to complete the ESOP allocation in a timely manner, it is important to effectively manage the allocation process. One of the easiest and most effective ways to manage the ESOP allocation process is by preparing and maintaining an allocation timeline.

Whether it be stories about the bankruptcy filings of the Tribune Company and the Antioch Company that we have discussed on this Blog, or the constant media attention on the Big 3 automakers, there appears to be questions about the differences between a Chapter 11 reorganization and a Chapter 7 liquidation:

As we continue our ESOP Planning discussion, one area you should review is your ERISA fidelity bonding. Every fiduciary and every person who handles plan funds must be bonded per ERISA Section 412(a), 29 U.S.C. Section 1112(a) - Bonding. The DOL recently published Field Assistance Bulletin No. 2008-04 – EBSA issues guidance on fidelity bonding for employee benefit plans to provide more guidance on the Fidelity Bonding Requirements. The Field Assistance Bulletin (FAB) addresses ERISA Fidelity Bonds, Exemptions From The Bonding Requirements, Funds Or Other Property, Handling Funds Or Other Property, Form And Scope Of Bond, Bond Terms And Provisions, and the Amount Of Bond in 42 Q&As. Here are some notable items:

Since we are closing in on the end of the year, I am going to use this as an opportunity to revisit my annual series of ESOP planning articles. A lot of the content will be the same from prior years, but I will also be updating the series for current changes and new resources of information. With that in mind, let's get started:

During our recent Safe Harbor Notice discussion we explored how the safe harbor match could be stopped during the plan year. Over Before It Began: Eliminating 2009 Safe Harbor Match After Notice is Distributed shares the relevant regulations that discuss the procedure to reduce or eliminate the safe harbor matching contribution and the information required for the supplemental notice:

Sunday evening it was announced that the Tribune Company was preparing for the possibility of a bankruptcy filing. Yesterday, it became a reality as the Tribune Co. Officially Filed for Chapter 11 Protection with assets of $7.6 billion and debts of $12.9 billion:

I cannot believe it, but this is my 500th post on the One-Stop ESOP Blog (plus 74 more on ERISA Rules and Regulations)! [It may not appear that way on the right sidebar, as I recently moved my historical posts from the ESOP Insourcing site from December 2006 – July 2007, with one post containing all of the historical posts for each particular month.]

We have spent a lot of time discussing the Tribune Company ESOP buyout and more recently the Tribune Class Action Lawsuit. The Wall Street Journal is reporting that the Tribune Company is preparing for a bankruptcy filing as soon as this week:

Engaging Employees Helps 18th Century Baking Company Become a 'Hot 100' Internet Retailer discusses the employee engagement practices of King Arthur Flour Co., an ESOP company and one of the 2008 Top Small Workplaces. King Arthur uses Employee Surveys to Stay in Touch with the Attitudes and Needs of their employees and the workplace culture:

The Economic Downturn: What Does It Mean for Employee-Owned Companies? discusses issues that employee owned companies will face during the current economic environment. While many companies will face a downturn in sales and profits, companies that utilize open-book management could have an advantage:

While Recruiting for Small Firms is geared towards accounting firms, it shares some recruiting best practices that would benefit many small businesses:

The December 1, 2008 Employee Ownership Update is online and discusses the following: