3(16) Fiduciary Services Setup Timeline
Thank you for choosing TRA to be your 3(16) Fiduciary! These services are designed to reduce some of the fiduciary and administrative responsibilities from you as the plan sponsor. Burdensome tasks like approving withdrawals and tracking eligibility are now in the hands of TRA, as well as the distribution of certain plan notices on your behalf to participants of the plan. TRA will also sign and submit your Plan’s Form 5500 so you do not have to worry about the deadline. This is great for freeing up some of your time to concentrate more on your business needs.
Phases of Process
Phase 1: Engage TRA for 3(16) Fiduciary Services
The first phase of the setup process is to engage TRA as the 3(16) plan administrator.
- Plan Sponsor will need to execute the TRA Plan Services and Fee Agreement (PSA)
- Plan reviewed to ensure it is structured to support our 3(16) services
- Plan (investment) provider
- Payroll provider
- Plan document specifications
- Eligibility requirements
- Entry dates
- Vesting schedule
- Implementation Specialist assigned, if the plan is new to TRA
Phase 2: Data Gathering
During Phase 2 of the setup process, TRA begins gathering the data needed to provide 3(16) services to your plan. This data is broken down into four basic categories.
Item 1: Historical and YTD census
- We will need a census spreadsheet with historical and Year to Date (YTD) information. This “one time” report will contain historical data such as vested years of service and entry dates, as well as YTD payroll data.
- The YTD file should include all payroll data from January 1st through the payroll period prior to the 1st payroll submission with your plan provider.
- Example: If your first payroll submission to your new plan provider was for payroll period beginning July 1st, you would need to submit this data from January 1st through June 30th.
- You can forward the spreadsheet to us securely by going to PlanSponsorLink at https://plansponsorlink.com/tra401k.
- We capture data on all wage earners including Social Security number, date of birth, date of hire, date of termination, compensation, contributions, and hours of service to name a few. This data is used to determine current participant eligibility, calculate years of service for vesting and more.
Item 2: Terminated Employees with Balances
If your 401(k) plan existed prior to transitioning services to TRA, we will need this same census data for all previously terminated employee that still have an account balance within the 401(k) plan.
Item 3: Ongoing Payroll Data
We need to capture employee census and payroll data on a per payroll basis. This ongoing data allows TRA to project future participant eligibility and keep vesting calculations updated so that they reflect accurately on participant statements each quarter. The contact data included on this file allows us to accurately mail any required notices to the participant’s home.
Spreadsheets should be submitted to us securely by going to PlanSponsorLink.
Item 4: Fidelity Bond
A fidelity bond is a type of business insurance. When applied to a 401(k) plan, this bond protects the employee benefit plan from any losses due to action of employees within the company who are responsible for handling the funds of the plan. The amount of the bond should not be less than $1,000. A plan is not required to have more than $500,000 in coverage except:
- Plans that hold employer stock are required to have $1 million dollar bond
- Plans that hold “non-qualifying assets” such as real estate are required to obtain a bond for 10% of plan assets or 100% of the value of non-qualifying assets
Don’t worry! If you provide TRA a copy of your fidelity bond, we will apply the various rules to ensure your plan is bonded at the appropriate level.
If you don’t currently have a bond, visit Colonial Surety
Phase 3: Plan Provider Setup
During the provider setup phase, you may be asked to sign a Plan Provider form, authorizing TRA to sign off on transactions, as a fiduciary. This will reduce your administrative responsibilities and liability. TRA will review, approve and process loan (if applicable) and distribution requests on your behalf.
Phase 4: TRA System Setup
In this phase, TRA will set up the systems we use for 3(16) administration. This includes establishing plan specifications in our systems as well as loading the data collected so far.
We will establish the plan specifications in our system based on the terms of your plan document. Your plan documents will need to be finalized and executed before these system set ups can be completed.
We will also be loading the historical data, YTD data and initial payroll file we collected under item number 2 above.
Once all of these things are established in our systems, we will be ready to begin providing 3(16) services for your plan.
Phase 5: Commencement
In this final phase, TRA will notify the plan sponsor that the 3(16) Fiduciary Services are ready to commence.
You will receive an email notifying you that this service has begun. In the coming days, your Client Relationship manager will reach out to you and provide additional information to ensure the plan is operating smoothly. We will provide a breakdown of who, what, when, where information to you to better outline specific processes relating to the 3(16) portions of your plan.
Phase 6: Ongoing Expectations
Timing is incredibly important when it comes to 3(16) Fiduciary Services. The next few items will display specific timing when it comes to administering your plan.
- Payroll files: Per pay period payroll files need to be submitted within 5 business days of the check date. This is to ensure we can accurately project eligibility and vesting.
- Year end Data: A the close of the plan year, TRA will aggregate the payroll data received throughout the year. This prepopulated year end census file will then be posted for your review and validation, along with a questionnaire that needs to be completed. It is imperative that this validation and questionnaire is completed as soon as possible so we can calculate any Employer funded deposits like, profit share, Safe Harbor, or Employer match. This data is also needed timely in the event that any refunds are due, the IRS deadlines dictate our timeline for this and we want to ensure no additional costs or penalties are applied. The sooner the data is received the quicker we can file all IRS Forms by the deadline.
Administering a retirement plan can be a lot of work. TRA’s 3(16) Fiduciary Services can make your job easier by reducing many of the day-to-day administrative burdens associated with sponsoring a plan. By providing us with the data needed to do so, you will be able to save time and ensure your plan is operating compliantly.