Tip for August 2018
It seems so simple, yet the U.S. Department of Labor (“DOL”) fines multitudes of enterprises every year for their failure to perform a basic task.
The Employee Retirement Income Security Act of 1974 (“ERISA”) requires that retirement plans have a written “Plan Document.” It’s a plan’s rule book. Human resources departments are judged by the DOL and the courts based on whether they perform the basic task of governing their plans by the rule book.
While many plans get in trouble each year because they fail to follow their Plan Documents, many more enterprises have a potentially serious risk lurking caused by a disregard, willful or otherwise, for the plan’s operational rules.
Three tips describe how to avoid the risk.
Operational risk management is a cyclical process which includes three key activities to be effective.
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Install a Controls Framework
Just as your firm has likely done in order to comply with regulatory programs other than ERISA, develop or acquire an internal controls framework. It should be tailored to the challenge of ensuring compliance with the Plan Document with a special focus on the payroll system’s intersection with the Plan’s operations.
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Commission an Operations Risk Assessment
A risk assessment is a process to identify potential hazards and analyze what could happen if a hazard occurs. Simply put, a risk can’t be neutralized if its presence isn’t known.
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Use Technology
Automating governance practices can reduce costs dramatically and remove the guesswork about complying with the Plan Document. New automation tools exist that expose the operational mistakes that trap many HR managers and their employers.
Roland Criss offers demonstrations of an operational risk management system. Contact us to schedule a date on your calendar.
