BenefitsPro caught up with Credico to discuss the issues and solutions plan sponsors can address in dealing with ongoing regulatory complexity: 

BenefitsPro: Employers are going to be spending more time with governance issues regarding retirement plans in the next couple of years. What are the most immediate compliance issues that employers are facing right now?

Robyn Credico: Making sure that they're operating in accordance with the plan documents is the one immediate issue. The other big compliance issue is making sure you comply with all the notice requirements. And over-testing requirements imposed by the IRS and the Department of Labor.

BP: Does this also fall into what's going on right now with new fiduciary standards that have been proposed and in falling in line with those?

RC: Clearly employers need to, even right now, understand what their fiduciary duties are. And if they have hired others—whether it be consultants, advisors or administrators—that they recognize what their fiduciary obligations are.

BP: Do employers have trouble even now understanding what their fiduciary obligations are?

RC: Many do. In fact if you look at our survey you will see that a number of them don't spend enough time educating themselves on their roles and responsibilities. And so we would certainly recommend education on your fiduciary obligations and how to fulfill them, and also making sure you've got the right insurance to cover yourself.

BP: It appears that few employers are being proactive in taking steps to address compliance or governance issues particularly with defined contribution plans. What is it about these plans that makes it difficult for employers to keep up with what's going on?

RC: Well I don't know if it's difficulty, or just that the plans are simpler and are outsourced. And so they don't need to pay attention. There's actually more risk in a defined contribution plan's compliance than a defined benefit plan. Because if you think about it, you're doing things every single day for everybody. And so your compliance risk there is greater, but I don't believe every employer understands that.

There's also now a lot more reporting required in defined contribution plans. There are fees, and if you have safe harbor plans you've got a lot of reporting to take care of. A lot of employers are just relying on their record keepers to do those things without monitoring them.

BP: Can you give some specific examples of compliance issues that employers tend to avoid until the last minute?

RC: The two common ones apply to both defined benefit and defined contribution. The first is making sure that the compensation that you're using to determine your benefits actually matches the plan document, and that means going back to your payroll systems and looking at all your pay codes and making sure they match to your definition of pay. Often that doesn't occur. And that impacts (whether it's your DB or DC plan) the calculation of all your benefits. It's a lot of work employers are often reluctant to do. And the corrections can be significant if you find a problem.

The other pretty common one is on the determination of eligibility, especially if they're either contractors or part-time people, or people who leave and come back. Those people don't always get included in the plans when they should.

BP: How many compliance reviews would you recommend and when would be a good time for employers to conduct them?

RC: If nothing much changes in the organization, at least every five years; if the company goes through a lot of mergers and acquisitions; Or if there's a lot of turnover on internal staff. We would recommend that the company do them as soon as those events have occurred. Often you'll see issues when there's a merger or an acquisition, or divestiture, or if in-house people have been doing all the work and nothing's documented and they leave.

BP: Obviously health benefits are on the rise, whether that has to do with health care reform or just the economy. How is that factoring into how employers view their retirement plans and how they're going to have to manage their retirement plans?

RC: Well clearly and we've seen this over the last couple of years, that there's only so much money to spend on benefits. So there's always this conflict between how much do I — the employer — pay for either my retirement or my health care benefits and how much cost do I impose on the participants? We saw back in 2008-2009, employers had to pick between health care costs and retirements costs. That will clearly continue.