The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in private industries. The Internal Revenue Service requires all qualified plans to be restated into a new plan document every 5 to 6 years. The Internal Revenue Service also requires an amendment every 1 to 2 years to the plan to correspond to new laws and regulations. The third party administrator may provide the documentation but the plan sponsor is ultimately responsible for this requirement. To ensure a retirement plan is qualified an ERISA attorney should review the plan document because third party administrators may not have an ERISA attorney draft the plan documents.
It is important to understand that the company sponsoring the plan is held responsible for any plan errors. Failing to make timely deposits of employee salary deferrals, or failing to file Form 5500 in a timely manner, are examples of plan errors that may lead to significant penalties. Having an ERISA attorney review plan documents is a preventative measure against issues with the plan. Correcting any issues that may arise from an ERISA attorney review will prevent bigger problems for your plan. For example, an un-reviewed plan that is under audit may lead to the plan becoming unqualified, the company losing their tax qualification, and possible litigation.
A plan sponsor should consider hiring an ERISA attorney if any of the following situations arise:
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- the plan determination letter is more than 5 years old
- merger, acquisition, or divestiture involving retirement plans
- when a company enacts an employee retirement plan
- if legal review of documentation of the plan has not been performed
- the plan is making a fiduciary decision affecting plan qualification