Actually, I'm sure that you are. If you're reading this, you are probably one of those few who is getting it right. In that case, you might be humored to see some of the errors that others are making. And, oh, maybe, just maybe, you'll find your plan(s) in here as well.
For the uninitiated, my 'top 10' lists aren't necessarily Top 10. They may not be the biggest or the baddest. They are just my observations in the order that I feel like typing them.
To poorly paraphrase Lesley Gore (and whoever wrote the lovely words that she sang): "It's my blog and I'll write as I want to."
- Plans are written to preclude employer discretion, but the administrators exercise it anyway. They give plan loans on a discretionary basis. They give in-plan investment advice to some, but not to others. They make exceptions to plan language when it seems like the 'right' thing to do; for example, they will allow a participant who really needs the money to take a $5,000 lump sum from their defined benefit plan even though the present value of the participant's vested accrued benefit is $5,500.
- When they do (or have done for them) nondiscrimination testing, they ignore little things like benefits, rights and features. The worst one of these that I have ever seen was in a plan document that offered a subsidized lump sum option (in a US qualified plan) only for British nationals. And, there was only one of them in the company -- the Senior VP of Human Resources.
- Nondiscrimination testing is on a controlled group basis for everyone else, but not for them. For them, it's just an inconvenience that they choose to ignore. Such complex issues shouldn't stop them from being in compliance.
- Defined benefits are calculated incorrectly or inconsistently. One person doing calculations rounds credited service up, another rounds it down. One person uses early retirement factors assuming that the participant is age nearest. Another assumes age next, and the third interpolates.
- SPDs don't accurately reflect plan documents. This is a biggie. See my post: http://johnhlowell.blogspot.com/2010/12/how-important-is-your-summary-plan.html
- Plan loans are repaid in ways that the plan document does not allow. Some (perhaps many) plan documents only allow plan loan repayment through payroll reductions. Yet, the administrators of those plans will gladly accept personal checks as payment toward the outstanding balances.
- Domestic relations orders are treated as qualified when they are not. This occurs when the plan's QDRO administrator (assuming they have one) treats their own job cavalierly. Oh, the "QDROs" I have seen. Most family law (that's a euphemism for divorce that the legal world has come up with) practitioners don't understand defined benefit plans. So, in their draft domestic relations orders that they produce, they split account balances (where account balances do not exist), they do not specify actuarial assumptions where such assumptions are necessary, they grant optional forms of benefit not allowed under the plan, and they allow for distributions at times that neither the plan nor the law allow. But, these DROs are 'qualified' as QDROs.
- They pay disability benefits in excess of the qualified disability benefit. OK, this one is pretty darn technical. Code Section 411 (the one dealing with vesting and accruals) essentially says that if the disability benefit that you can get from the plan exceeds the retirement benefit you can get from the plan, then the bigger of the two becomes the retirement benefit. Especially in collectively bargained defined benefit plans, this happens frequently, but I've never seen it administered in accordance with the Code.
- If you administer a qualified plan, you probably have a nonqualified plan as well, so I am going to sneak this one in as well. Your top-hat plan may not be. Have you evaluated your plan participation (or had someone do it for you)? Are all of your participants in a top-hat group? If not, you're not the only one.
- Not all of those annoying yes/no questions on the plan's Form 5500 have been filled out properly. Yes, you are checking the boxes that keep you out of trouble, but they may not accurately reflect what is happening in practice. Could you be perjuring yourself?
Oh, by the way, if you have these or other problems, I might be able to help.