BACKGROUND:
When a small business offers a workplace retirement plan, it must have the manpower to manage all the required administrative work to run the plan. When human resources are stretched, the plan sponsor can choose to outsource the company’s 3(16) fiduciary services. This was the case with a thriving medical practice that has three offices in the New York metro area, with 20 employees across the locations (physicians, medical assistants, office managers, and clerical and billing personnel).
What is a 3(16) fiduciary?
A 3(16) fiduciary is an entity that manages the key retirement plan responsibilities for the client. Those activities are required by ERISA, the federal law that stipulates the minimum standards for retirement plans and health plans in the private sector. (ERISA stands for the Employee Retirement Income Security Act of 1974.)
The fiduciary services associated with retirement plan administration are meant to protect participants from malfeasance—and outsourcing these services minimize the risk and responsibility for doing the work for the plan sponsor. In short, by outsourcing 3(16) services, the employer alleviates concerns about fiduciary liability, administrative complexity, and the amount of work involved.
PROBLEM:
The multi-location medical practice is physician-owned; the partners/owners offer a 401(k) plan with an employer match to all eligible employees. However, all the plan filing, reporting, notifications, distribution management, and other tasks presented an administrative burden that was outside the small office team’s capabilities. Additionally, the owners did not want to be responsible for managing the plan’s compliance testing—or hiring more personnel.
At one time, a central HR person was responsible for all plan administrative functions; however, the HR person had entered incorrect information in some participants’ records and had neglected to log other required data due to insufficient experience with this type of recordkeeping. The practice ended up paying expensive penalties to both the IRS and the Department of Labor (DOL) due to these errors and oversights.
In addition, that employee was tasking other office personnel to assist with various aspects of plan administration. The challenges of managing these complexities pulled staff away from patient-focused, practice-building activities such as patient relations/communications, patient intake, and billing.
SOLUTION:
Intac FuturePlan was contracted as the outsourced 3(16) fiduciary for the medical practice, saving the staff valuable time in administrative functions. The arrangement has also saved the owners money compared to the cost of hiring a full-time employee to perform all the functions—as well as avoiding costly penalties for IRS and DOL violations.
Our team worked directly with the practice’s payroll company to ensure data integrity in each pay period through FuturePlan’s 100-point payroll checklist. This payroll support—which looks for contribution, census, eligibility, and loan errors—ensured that all paperwork was and remains properly completed, all quarterly filings and notifications are submitted timely, and plan testing for compliance is performed as required by ERISA.
Intac FuturePlan also implemented paperless enrollment, manages all eligibility and mandatory year-end notices, and maintains oversight of the recordkeeper to ensure data integrity.
The staff’s reduced (and ancillary) workload enables the team in all three offices to focus on their core responsibilities of revenue-producing operations (patient service, billing) and supporting the physicians.
The plan sponsor:
- has peace of mind regarding all facets of complex plan administration,
- knows that Intac FuturePlan is keeping abreast of all government rules and regulations for qualified retirement plans,
- has confidence in how payroll is working in tandem with plan design,
- has reduced fiduciary risk,
- and has avoided costly government fines due to errors.
According to one of the physician partners,
“With Intac FuturePlan handling all the fiduciary duties, we are now delighted to promote that we offer a retirement plan to our employees rather than dread the paperwork, testing, filing, and more associated with managing our plan. Working with Intac FuturePlan has streamlined the entire process for us and frees up our team for the work for which they were hired. And, we don’t have to be concerned about how our retirement plan ‘runs’ in the event of office turnover.”
Intac FuturePlan offers small businesses personal guidance and support, with plan monitoring, administration, and customized plan design. Our services ensure that our clients’ needs are well served and their business and savings goals are met. Contact us to find out more about our third-party administrative and 3(16) fiduciary services for your workplace retirement plan.