Implementing a Plan

You have now completed your research, decided on the form of the plan your company will use, so you're probably asking - what do I do now?

The next step is to draft the formal Plan Document that will provide the foundation of your plan. This will contain the definitions, terms, conditions and provisions of the plan. The final plan document should be approved by the Board of Directors or the senior officers of the company.

Once the plan document has been approved by your legal and tax advisors and signed off by the Board of Directors, you are ready to proceed with the remaining plan documents and forms. These are usually distributed to the eligible executives in the form of an enrollment package.

Whether or not you are considering using an online or paper enrollment, you will need to send an announcement letter, informing eligible participants of the benefits of joining the plan. This is usually distributed several weeks prior to the start of the enrollment period.

When the enrollment period is complete, you must inform the Department of Labor that you are installing a Non-Qualified Deferral Plan. This form should include the following:

  • Plan sponsor's name
  • Plan sponsor's address
  • Plan sponsor's tax ID number
  • Plan name
  • Number of participants

If you are a public corporation, unless you qualify for one of the exemptions, SEC regulations require you to file an S-8 form. Private companies may not use this form and should configure their plans to qualify for one of the exemptions.

While Deferral.com will allow you to do online enrollment, there are times when you will need to provide hard copies of the plan forms to your executives. In addition to a formal copy of the plan document, a typical package would include:

  • The Summary Plan Description (SPD) is a user friendly version of the plan document, sometimes also known as the brochure. This summary outlines and explains in plain English, the major provisions of the plan and how they relate to the participants, often supplying helpful examples. Plan sponsors are required to provide this document to the participants.
  • The participant Election Form is used by the eligible executive to enroll in the plan. This form constitutes an irrevocable election which, once made (with very limited exceptions), may not be changed. Depending on the plan provisions, this form might have several sections, for example:
    • The deferral election section where the executive indicates the amount and type of compensation to be withheld from their pay check
    • The account allocation section - if the plan allows the executive to divide his/her deferral amount across more than one account, this is where he/she would indicate what percentage to put in each account. If the plan only has one account, this section would not be necessary
    • The fund allocation section - if the plan tracks more than one investment return, this is where the executive selects the funds and percentages for each account. If the plan has only one investment choice (as in an interest rate only plan) this section would not be necessary.
    • The distribution section is where the executive decides how (and, if the plan allows, when) to receive his/her account balance.

  • The Beneficiary Designation Form, unlike the Deferral Election Form, is revocable and may be changed any time the participant wishes. While different states may require specific language, this form should always include areas to list more than one Primary and Contingent beneficiary, a percentage field if more than one person (or entity) is listed for each, and a tax ID#, if available. This would be Social Security number for individuals or a tax ID for charities or trusts. While a tax ID number is not required, it is extremely helpful to the administrator when trying to track down beneficiaries and can greatly speed up the commencement of survivor payments.
  • A self addressed, stamped envelope should be provided for the participants to return their forms

Once your plan is effective and your participants begin deferring contributions, you will need an administrative services system to record, track and report the participant account activity and balances. If you have entered your plan information and elected to use the enrollment feature of Deferral.com, your participants have done most of the work for you. All their elections have been automatically entered in the database and you are ready to begin administering your plan.

If you are interested in learning about the Plan Administration functionality of Deferral.com, please view our automated Demos or contact us at info@deferral.com.

The information contained on this Site is general in nature and should not be considered legal or tax advice. This information is provided for general educational purposes. The facts of your particular situation, and developments in applicable laws, rules and regulations or the interpretation thereof, may affect the information as it pertains to you. You should consult with your attorney or tax advisor regarding your specific legal or tax situation.


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