Simplicity should be a key goal in plan design, plan objectives and participant communications. Regulations make this challenging, but the benefits of simplicity are many.
The Employee Retirement Income Security Act could never be described as simple, streamlined or straightforward. So yes, ERISA and KISS (Keep It Simple, Stupid) are two acronyms that seem like strange bedfellows. Granted, there are things that will never be simple about the design and administration of ERISA plans, but my challenge to you is to change your perspective and think about where you can follow the tenet of simplicity.
First, look at your plan document holistically and with an eye as to what the objective of that plan really is. The company wants to provide retirement benefits to attract, retain and reward its employees as efficiently as possible and with as little risk as possible.
Think about how the plan document revision process works - you and your attorney work to ensure the plans are updated to meet all regulations, that there are no conflicting or duplicative provisions, perhaps no confusing sections. You ultimately live and die by that plan document. When was the last time you reviewed it to just simply make it better? Simplicity introduces the ability to streamline processes, reduce risk and make plans easier to administer and communicate to participants.
If your plan has been around a while, it probably has provisions that made good sense at the time they were adopted but might not any longer. I've seen nonsensical provisions that were related to payroll systems limitations from a decade ago, the way a paper form was designed and labor agreements for a specific business unit.
Here are some suggestions for getting started on a review of your plan document:
* Think about how you define terms. Don't box yourself in by being so specific that an amendment is required every time something changes in the dynamic business environment.
* Make the plan as participant-friendly as possible while adhering to regulations. Don't impose unnecessary restrictions, shorter deadlines than required or cumbersome paperwork.
* Try to view the plan document from all angles. What if you suddenly have more operating units? A new class of employees? More participating employers? An acquisition? How adaptable is your document to your particular business environment?
* Do not outline administrative procedures in your plan document. These should be reviewed on an annual basis and maintained outside of your document.
This is your first step toward simplicity - change your perspective and take the time to make the foundation of your plan administration as straightforward and basic as possible. The potential changes will flow into your administration, processes, call centers and participant communications. The benefits are many. Simplicity translates into clearer interpretations, better execution and reduces risk for errors. Participants like simplicity because it injects order into a very intimidating and complex environment.
As Antoine de Saint Exupéry said: "It seems that perfection is reached not when there is nothing left to add, but when there is nothing left to take away."
Contributing Editor Mary Nell Billings is director of benefits, Americas, for Hilton Worldwide, headquartered in McLean, Va. She holds both a BBA and MBA in accounting and finance from the University of Memphis. She can be reached at MaryNell.Billings@hilton.com.
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