Masonry Magazine August 1962 Page. 15
Series
(Continued from page 5)
6: Processing of the plan for Internal Revenue approval.
7: Development of administrative procedures in the establishment of central administrative office.
8: Commencement of contributions into pension.
9: Payment of benefits and accumulation of invested through the insurance company or the bank.
10: Periodic meetings of the trustees to process applications and to resolve the more complicated questions which have not been delegated to the administrator.
The order of the above steps is often varied in individual cases, but the pattern is a most effective one. Recognizing that variations are possible, I will now discuss the steps in the listed order.
Step 1-Effective Date of Contributions
The union is obviously interested in seeing that contributions begin as soon as possible. There are pitfalls in a hasty agreement on this point. The most significant one has to do with delay in securing Internal Revenue approval of the plan. Approval is necessary in order to gain the full tax advantages of a pension plan. The safest course is to start the contributions after Internal Revenue has approved the plan. This is the recommended course if agreement can be secured from the union. A second method is to start the contributions before Internal Revenue approval but place them in a separate escrow until the plan is approved. This method involves the disadvantage that employers cannot claim current tax deductions on the pension contributions during any fiscal year which precede the formal inception of the plan. A third method is to place the contributions in the pension fund with a preliminary plan adopted promptly by the trustees, but with the idea that the plan will be amended within a reasonable time based on appropriate actuarial studies of the data.
Step 2-Appointment of Trustees
The employer group will appoint its trustees to share in the management of the pension fund, and the union will likewise appoint its trustees. The position of a trustee is a very responsible one. This has been brought home by recent changes in the Federal disclosure law. The trustees should be carefully selected and should be willing to devote more than a minimum amount of time to the supervision of the program, especially during its early stages.
Soon after the trustees are selected it will be necessary to prepare the trust agreement. It is recommended at this point that competent counsel be retained to prepare the trust agreement in accordance with the general objectives established by the trustees, the employers, and the union. While the trust agreements used by other companies may be a valuable guide the final agreement should be prepared to meet the exact objectives of the parties.
Month: Part II continues with Step 3-Development of Plan.
HENRY August, 1962
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