Retirement plans need ongoing attention

Q. Why might it be important for human resource professionals to review their current retirement plan?

A. There are a handful of very good reasons to regularly review your company's 401(k) or defined-benefit retirement plan. According to area experts, it's imperative that this task move to the top of any human resource manager's "to do" list.

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"(I find) there are three main reasons," said Kevin Peternel, vice president and principal of Human Resources Group Inc. in Madison. "First, it's due to corporate values. That means that if your company believes in the value of creating the opportunity to retire without much hardship, then the company needs to understand they have a moral or ethical responsibility to do it."

Peternel, who joined the human resources consulting and recruiting firm in 2004, said the second reason is to make sure the plan is attractive to new employees and that it keeps long-term employees stable.

"There are all kinds of types (of retirement plans) and you need to make sure you're remaining competitive with the market," he said.

The third reason, he said, is to make sure the company is staying abreast of legal expectations like fees and regulatory requirements.

Ronald Lehmann, assistant vice president of Johnson Bank in Madison, agreed.

Lehmann said it's important for human resource professionals to make sure the actual retirement plan provider has fully disclosed any hidden fees to the company, like "finder's" fees, "shareholder's" fees or "mortality expense" fees.

He said one of the best ways to uncover some of these costs is for human resource managers to arm themselves with a Department of Labor spreadsheet that outlines the fees; this will show employees that they truly understand the plan's components.

Lehmann also said it's critical that managers follow the requirements laid out by the Employee Retirement Income Security Act of 1974, or ERISA.

The act, Lehmann said, assigns four "core duties" to plan sponsors, or "fiduciaries": acting prudently, acting with loyalty to the plan participants, diversifying investments, and keeping the plan up to date.

He said the best way for a manager to demonstrate that he or she is following through with fiduciary duties is to keep up with regular reviews and to make sure everything is documented.

"First and foremost, a company should establish processes to carry out its responsibilities and prepare appropriate documentation of fiduciary decisions," he said. "Retirement plan sponsors who use an investment policy statement to provide a framework for their activities and decisions regarding plan investments have taken an important step in demonstrating to both regulators and employees how serious it takes its fiduciary responsibility. In addition, documentation in the form of minutes may prove important in an audit by establishing the company used a prudent process in administering the retirement plan."

Lehmann said human resource managers should think of regularly reviewing their retirement plan the same way they might think about going to the doctor for a yearly physical � it's a necessity and, in some instances, it may even be a life-saver.

"A practice of regular review and analysis of the plan and its operation is essential to keeping the plan healthy," he said. "Problems in plan administration are easier, and less costly to fix when they are discovered early.