Benefit plan design, administration and documentation is not thrilling stuff. But when things go wrong, it can be very exciting. As a plan sponsor, there is no "perfect" plan design that you can latch on to for every plan and never have any problems because you still have to administer them. Still, there are some things about plan design and administration that can reduce risk, so consider the following as things you can do in designing your plan.
1. Don't make the plan sponsor the fiduciary of the plan. It is not required that the company that creates the plan automatically takes on the role of "fiduciary." Instead, consider whether creating an Employee Benefits Committee to be named as the fiduciary might be more appropriate. The committee structure may help differentiate the fiduciary plan functions from the non-fiduciary (i.e., business or settlor) functions, thus reducing potential conflict-of-interest issues as well as concerns over executive v. fiduciary status in making hard business decisions. Plus the committee could retain separate legal counsel from the company specifically for the plan concerns, thereby further preserving privilege.
2. Along those same lines, avoid naming key corporate officers as fiduciaries. C-suite executives have loads of information about the company but that knowledge would also be imparted to them in their capacity as plan fiduciaries. Wearing a high level executive hat AND a plan fiduciary hat carries with it a host of potential conflict-of-interest issues. Its better to keep the company executives away from the plan if possible.
3. Before you go any further, make sure you have strong reservation of rights language in your plans. Make sure that plan documents specifically provide for the ability to amend, revise or terminate the plan at the discretion of the fiduciaries. Also, consider including the reservation of rights language in every communication from the plans. Though not specifically required under ERISA, caselaw on the topic seems to clearly favor using the disclaimer in all communications.
4. Clearly define roles and responsibilities. Make sure that everyone who has a role in plan administration knows the role and is held accountable for what has to be done. Consider creating an administrative manual for the plan that specifies when and how plan administration activities are completed. Don't get caught wondering whose job it was to take care of something that goes wrong.
5. Don't cut off appeals. Appeal periods that are too short or procedures that are vague or cumbersome are always a danger. Make sure the plan documents explain how to exhaust administrative remedies and what the specific steps are to complete the appeals process. Make sure to follow the process as it is written. Be aware of the new requirements for external appeal if this applies to your health plan.
6. Keep a history of the plan. Someone should always know where documents are, how things were done in the past and what service providers were used. Consider making a written record of all the plan professionals used for each plan year and what services they provided. Keep track of where plan records are kept, even the old ones, and pass the history down to incoming plan personnel. Like a family oral history, take the time to share the history of the plan with new generations so they have some idea of "how things were done."
Again, none of these is definitive or absolutely required. But in an age where benefits administration is getting more and more confusing, a few simple tweaks to your administrative processes can go a long way toward making things easier down the road.