"Reviewing PEO Benefits Plan Documents"


One of the many benefits PEOs provide to their client employers is employee benefit plans—401(k) retirement plans, group health plans, and Section 125 cafeteria plans. These various plans are subject to a number of requirements under the Internal Revenue Code (code) and the Employee Retirement Income Security Act (ERISA). Compliance with these many requirements is necessary to stay legal and to be able to provide benefits in a tax-advantaged manner. One of the basic requirements is that such plans be memorialized in written plan documents.


At the most basic level, the purpose of a written plan document is to lay out the rules for the plan: who is eligible to participate in the plan; what benefits are actively provided; what contributions are required; how and when the benefits are provided; and all such related matters. Beyond that basic level, there are other reasons for the document. Laws require that plan documents contain various provisions.

The Internal Revenue Service (IRS) and the Department of Labor (DOL) are charged with oversight of the code and ERISA, respectively, as these laws apply to plans. Both of these agencies require that once the terms of the plan are written down, they be followed. Failure to do so creates issues. Specifically, noncompliance could:

  • Cause the 401(k) plan to lose its tax-favored status;
  • Cause health plans or Section 125 plans to provide taxable benefits rather than tax-free benefits;
  • Create breaches of fiduciary duty; and
  • Lead to participant claims for benefits that were denied under the plan.

While all plans need documents and PEOs need to review them, the 401(k) plan is the plan that has more frequent regulatory and legislatively required changes. Most of the focus here is on such plans, but the comments apply to all PEO-provided plans.



It is probably a good practice to review plan documents annually. This review is not meant to be a full-blown word-by-word review. From time to time, there will be changes made to the laws and regulations governing plans. This annual review should be more of a spot-check to be sure that documents are up-to-date and have all the correct language in them.

Click here to read the entire article from the September issue of PEO Insider

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