How many pages is the plan document?

[Peter Gulia]

Quick (we hope) and unscientific survey:

If a plan's sponsor were to read all of its plan document, how many pages would that be?

In the prototype or volume-submitter set you regularly use, counting the adoption agreement, base document, and all appendixes and supplements that state provisions of the plan, how many pages (in total) is it?

[Peter Gulia]

I'll start the sampling:

For a small-business employer's "plain vanilla" safe-harbor plan, the prototype is 193 pages.

 

[BG5150]

The pdf for our BPD (from Relius) is 110 pages.

The AA for a 401(k) plan is 48 pp. including appendixes.

The SPD, including cover page & table of contents runs 20 pp.

Loan policy is 2 pages.

It is a VS w/ adoption agreement plan.

[RatherBeGolfing]

Our BPD is 83 pages

AA for a 401(k) is 38 pages

SPD is 15 pages

That gets us to 136.  Depending on the clients needs (loan policy, forms, etc.) There are an additional 10-30 pages.

We use Ft William's "prototype formatted" VS document.

[Peter Gulia]

Thank you for the helpful responses.

(My opening example, which isn't even in the running for the longest I've seen, is 193 pages without policies, procedures, or forms, and without the summary plan description.)

So should we have a contest on which preapproved document is the shortest, and which is the longest?

 

[ESOP Guy]

Length has never been an issue for me.  There are documents that are laid out better then other by a long shot as far as I am concerned. 

Some characteristics of good and bad that come to mind quickly are:

Good:  A good definitions section at the beginning

Bad:  Too many things that reference other sections.  There are times when I need to know the answer I got to the section title what I want to know.  It is constantly sayings as defined or reference in section .... and then that section says as defined or referenced in section...

Good:  In ESOP documents ones that answer simple questions like what is a Year of Participation for purposes of  having 10 YOP so you can take a diversification.  You would be amazed how many ESOP documents don't answer that question. 

I don't mind looking through lots of pages for the answers.  You can get the document as a pdf often times and have use the pdf search function to get you close to the right section quickly.  Actually have the answer in simple clear terms is the bigger challenge.

Last one since you got me going intended or not!

ESOP loan notes without trip up provisions.  In world in which all amortizations are done by computers why write an ESOP loan that requires a 360 day year for its amortization?  (More common then you would think but not super common.  But has seen more then one ESOP have years worth of allocations redone when someone realizes all the share releases were computed with 365 day year amortizations and those done wrong.)  And the loan pre-payment provisions I have seen have the most awkward wording on how that is done.  I have literally been in a room full of CPAs and we have had to go back to the attorney and ask him what the note means on how the pre-payment should be handled. 

Off my soap box for now!

[Peter Gulia]

ESOP Guy, thank you for the useful (and interesting) response.

(And I share your liking one comprehensive definitions part and disliking provisions stated by assembling cross-referenced provisions.)

I'm interested in your (and other BenefitsLink mavens') thoughts about how realistic it is to believe that a plan sponsor's executive or employee read the whole document before deciding to adopt it.

 

[Belgarath]

145. That includes doc. AA, appendices, administrative procedures, loan policy, QDRO procedure, and SPD. We won't count the several thousand pages of e-mails that some clients seem to require...

P.S. - to my knowledge, NO ONE has EVER read it all. I did have a client read an entire 403(b) document ONCE.

[TPAJake]

Our clients never read it either & the AA starts with a one page executive summary that basically says "we wrote this for you, now give the employees this other thing called an SPD".

BPD is 108 pages, SPD is 21 pages & AA is 44 pages.  If they have a loan policy, that's an additional 3 pages.

[RatherBeGolfing]

3 minutes ago, Belgarath said:

P.S. - to my knowledge, NO ONE has EVER read it all. I did have a client read an entire 403(b) document ONCE.

I have an attorney client who reads every page of every document I send him.  During the EGTRRA restatement, I fielded over 20 questions on the language and context of certain sentences of the BPD.  And this is for a very basic SH 401(k) plan.

[Peter Gulia]

So our samples are over 300, 180, 175, 166, and 145 pages.

A follow-up query:

If we concur that almost no sponsor reads the plan document, does an employer read the summary plan description?

And if it reads the SPD, does it use that reading as a way to check that the plan document states the provisions the employer intended?

[BG5150]

The docs at my former company ran about 80 pp.  It was a VS in an IDP format.

[TPAJake]

Not likely.  In my experience they find out that the provisions don't match their intentions when it comes time to write a check.  Or they get a refund...

[BG5150]

7 minutes ago, Fiduciary Guidance Counsel said:

And if it reads the SPD, does it use that reading as a way to check that the plan document states the provisions the employer intended?

Anecdotal evidence tells me most ERs do NOT read anything we send them. 

[Bird]

1 hour ago, RatherBeGolfing said:

Our BPD is 83 pages

AA for a 401(k) is 38 pages

SPD is 15 pages

That gets us to 136.  Depending on the clients needs (loan policy, forms, etc.) There are an additional 10-30 pages.

We use Ft William's "prototype formatted" VS document.

But if you use the "answers only" version of the AA that gets it down to a manageable 10 pages or so.  That said, I don't expect many sponsors bother to read that.  I do not think it is realistic to expect a plan sponsor to read the BPD..."nutty" would begin to describe that.

[Kevin C]

Our VS adoption agreement is 52 pages.  The base document is 165, including the cover page.

 

We try to cover at least the highlights of the adoption agreement with each client.  Only about 2-3% want to go through the entire adoption agreement line-by-line.  We only have one client that tried to read the base document.  I was impressed that he made it most of the way through.

 

My experience has also been that very few actually read anything we send, including the SPD. A few do look at the SPD when they have a question about the plan. 

[Peter Gulia]

To build factual support to show that an employer intended a provision different than the one stated by the plan document the employer signed, what evidence do you use?

 

[401king]

237 including our cover letter, AA, PD, Trust Doc, opinion letter, IPS and SPD.

[Belgarath]

Peter - corporate minutes, plan illustrations, prior plan document if the error is a restatement, e-mails or other written communication, SPD, etc. - I suppose it might depend upon the error and the specific situation. Could include payroll records, employee handbooks - anything to support your case!

[ESOP Guy]

1 hour ago, Fiduciary Guidance Counsel said:

If we concur that almost no sponsor reads the plan document, does an employer read the summary plan description?

 

Not only don't they read the SPD they don't even read the couple page summary of plan provisions we send them every year as part of their annual reports package.

I will literally (using the word correctly here) send our reports package to the client electronically and the next day when they see people's balances I will get an e -mail that asks me things like, "what is our vesting schedule?".  The answer is found on page 1 of the summary of your plan provision which is about the 5th page into the annual reports package. 

At one TPA firm I worked for I was put in charge of all our balance forward clients. I got tired of having to check and update the summary of plan provisions.  So I took them out of our standard report package.  Not one client said a thing.  The number of questions from clients about what they plan said did not go up one bit. 

Don't get me wrong for most clients their plan is one of many things they do in a day.  So they have hired a TPA to rely on and that is what they do.  So in one sense it is understandable.  In another sense many of the ESOPs I work with is 100% owner of the company.  You would think the CEO or CFO would have a better understanding of the owner of the company they work for. 

[ESOP Guy]

20 minutes ago, Fiduciary Guidance Counsel said:

To build factual support to show that an employer intended a provision different than the one stated by the plan document the employer signed, what evidence do you use?

 

The VCP filings I have been part of that make this case we send the IRS the following if we have them:

1) If a prior document had the desired provision that helps a lot.

2) If you can show that is how it has always been communicated to the employees.  Being able to show HR material they use to explain the plan to the employees or such things.  If the SPD has the desired provision and the document doesn't seem to help a lot also.

3) If you can show that the plan has consistently been ran the desired way helps.  The longer the better. 

4) Any other communication to about the desired provision helps.

In a recent case we were able to show all the plan documents from the '90s to before the most recent restatement had the desired provision.  It looks like whoever did the restatement just blew it.  We were able to show the desired provision was how the plan was done before and after the restatement in question.  That VCP was accepted 100% by the IRS.  They just allowed a reto amend. 

[Peter Gulia]

Thanks, again, for the further observations.

Imagine a new plan (so there is no preceding document):  what evidence can one find that the employer intended a provision different than the one stated in the one plan document it signed?

About looking to how a provision was communicated to employee, won't the summary plan description (typically compiled by the software from the same instructions given to make the plan document) not say anything inconsistent with the plan document?

Will the IRS allow a reformation if the only evidence of the intended provision is the employer's in-operation administration?

[Belgarath]

Minutes, e-mail, written communications. Could be a draft AA with Box "A" checked, with a letter form the client saying "the provisions of this draft document are what we want" and the final document checks box "B" instead. The possibilities are endless.

Many SPD's are custom drafted, or based on the doc and then modified. I could see where someone has a bad day, modifies the SPD to be correct, then forgets to change the AA. (Well, that'd be a REALLY bad day, but anything is possible.) Other than no one ever making a mistake, I don't know how you can generalize too much about these things in advance, as the good old "facts and circumstances" seem crucial in any such situation.

[Peter Gulia]

This discussion is also a nice illustration of the value-added of a good third-party administrator.

I confess I've been imagining a situation in which a plan's sponsor gets no service from a lawyer, other practitioner, or TPA, and the only written evidence of what the plan's sponsor intended is the entries in a recordkeeper's computer system that generated the whole kit of plan documents, including the summary plan description.

[TPAJake]

I have a client with a Plan Document written by their Attorney--Operated since 1985 without a written loan policy.  Asked the Attorney office for a copy so we know the terms of the loans....Nothing but silence in return