PLANSPONSOR - December 2018/January 2019 - 56

ERISA EXAMINATION
Amending a Plan
What do plan revisions entail?
I
n our last column, we said plan sponsors need to read and
understand the plan document. In making this recommendation,
we noted this means to review the most recent
restatement of the document-i.e., when a plan is rewritten in
its entirety to reflect changes in the law affecting it-plus any
subsequently adopted amendments.
We generally recommend
creating a working document
that incorporates the " properly
adopted " amendments ...
Flipping back and forth between the restatement and
multiple plan amendments becomes cumbersome. For this
reason, we generally suggest creating a working document that
incorporates the " properly adopted " amendments so you have
one easy-to-reference resource. We emphasized the words properly
adopted because, when adopting plan amendments, it's
important to make sure the proper procedure is followed-i.e.,
that they are signed by an authorized person and executed by
the applicable deadline.
Who Can Amend the Plan?
To answer this, start by looking at what the plan document
says (if you read our last column, " What Does the Plan Say?, "
you already know). Most plans provide that the employer/plan
sponsor can amend the plan. For a typical employer, this means
the employer's board of directors. However, often boards don't
want to get involved with administrative or nonmaterial amendments.
To avoid such involvement, the board may delegate
amendment authority, either by stating it has done so in the plan
document or by a separate resolution it records in its minutes.
Our preference is to spell it out in the plan document so the
specifics are easy to reference, rather than having to locate resolutions
that have been adopted in past meetings.
The board can delegate full amendment authority, but
sometimes it may not want to give up so much control. In those
cases, it may choose to delegate authority regarding amendments
that are: 1) legally required; 2) administrative only; and/
or 3) won't result in a material cost to the company.
But what is material? That depends on the company and
plan, but specific dollar amounts can be used to lend some
clarity to the amendment authority.
And who should be given this delegated amendment
authority? This will depend on the company's structure, but
possible delegates include the retirement plan committee,
head of human resources (HR), chief financial officer (CFO), a
summer intern (just checking to see if you're paying attention),
or anyone else with plan responsibility. The important point is to
make sure such authority is properly documented and that the
proper person signs the amendment.
Watch Your Language
When signing the amendment, the authorized person should
include the date of execution. While that may seem obvious, too
many times we have seen an amendment signed but the date left
blank. This can be a real problem. If there is no date by the signature,
it becomes difficult to prove to the IRS that the amendment
was executed by the applicable deadline.
Also keep an eye out for " as of " language-while sometimes
an amendment can be adopted retroactively and be effective
" as of " a prior date, the execution date should be the actual
date signed, not signed " as of " an earlier one. While that may
sound picky, we have seen the IRS claim an amendment was not
adopted within the proper time frame, based on such language.
Usually we are discussing plan fiduciary obligations. Plan
design-including changing the design-is a settlor function
that does not carry any Employee Retirement Income Security
Act (ERISA) fiduciary responsibility. However, once the plan is
amended, there are fiduciary obligations with respect to implementation
of the amendment. If the change is a material modification,
participants must be provided with a summary of the
modifications to keep with their summary plan description (SPD).
Alternatively, you can update the SPD to reflect the change.
Distributing these documents opens a can of worms that we will
save for a future column. For now, be sure those amendments are
properly dated, signed and included in any plan document review.
Summer Conley is a partner in the Los Angeles office of
Drinker Biddle & Reath LLP. Michael Rosenbaum is a partner
in the firm's Chicago office.
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