The statements can easily backfire – or contain inaccuracies. Here’s how to find and fix two common trouble spots:

1. Avoiding incorrect info

Accidental math errors are the most common – and damaging – problem with total comp statements.
They’re also the toughest for you to spot and correct before the firm sends out the statements, since you aren’t the one who crunches the numbers.

But there are two ways to minimize the risk:

• Make a list of the data sources you use, such as Payroll, your 401(k) provider and health plan carrier, and
• Ask each source to pull and review a few random samples. If they’re OK, chances are the rest will also be fine. But if they contain errors, you can be pretty sure others will have mistakes.

A related problem: Some statements are arranged as a single list of costs, one line after another. To cut the risk of putting something on the wrong line, break the statement down into small sections (e.g., salary, healthcare and retirement). Bonus: This helps make statements easier for employees to follow.

2. ‘Just increase my salary’ syndrome

Sometimes, total compensation statements can actually decrease salary satisfaction, rather than boost morale. A handful of employees may gripe, “Why can’t you just increase my salary instead?” That’s especially true for legally required benefits (like workers’ compensation) and low-profile benefits such as term life insurance. Two fixes that work:

• List “government-required benefits” as a section of the statement. Avoid the term “mandated,” since many employees are unfamiliar with it, and
• Consider adding a section that shows employees how much it’d cost them to line up their own coverage instead.

The scariest part: Victims of benefits-related ID theft often make out worse than those who fall prey to the more common variety. The bad guys are ahead of investigators after such thefts occur, and are often very good at covering their tracks.

Also, because benefits ID-theft is a relatively new type of crime, there’s no well-established system for victims, plan sponsors and vendors to set things straight after the fact.

401(k) accounts a prime target

Not surprisingly, employees’ 401(k) accounts have become the primary target for benefits thieves. An alarming MSNBC news report showed just how easy it can be for thieves to tap into an employee’s 401(k) accounts: If an online account gets hacked into or account paperwork falls into the wrong hands, it takes only a few mouse clicks to wipe out the victim’s retirement savings.

With typical credit-card or bank account fraud, victims need only call their card issuer or bank, report the crime and refuse to pay for an item. But 401(k) theft is much, much harder to resolve.

Three huge obstacles:

1. Money in 401(k) accounts is not federally insured, like a bank account.
2. 401(k) accounts rarely — if ever — come with automatic identity theft protection from the vendor, like credit cards.
3. Even if the theft is successfully resolved, the situation becomes an ERISA nightmare for plan sponsors, because your company also has to account for the way the theft affected the growth of the employee’s account before the money was restored.

One of our readers shared a horror story from her company — one that at least had a happy ending — that underlines the need to be extra careful, especially in light of the recent Supreme Court ruling that makes plan sponsors vulnerable to employee lawsuits.

Mistakes caught after the fact

The company was in the process of changing 401(k) service providers when it discovered the outgoing provider had goofed on the plan documents in the existing plan.

The documents said the normal payout form would be a joint survivor annuity. So if anyone wanted another option – such as an IRA rollover or a cashout – he or she needed documentation with a notarized signature from a spouse or other beneficiary.

Even worse, there were administrative errors made on the election end. Records showed the old provider put through inappropriate elections from both current and ex-employees. A nightmarish paper chase ensued. Senior management had to calculate if the plan and its participants suffered financially from the inappropriate elections that went through. In addition, the company had to contact everyone who may have been affected by the errors and issue corrected documentation.

One saving grace in this whole mess was that the outgoing vendor (a well-known vendor with a good reputation) agreed to pick up the tab to correct the mistakes that’d been made. It took several months to clean up the mess, but everything was sorted out. Things could’ve turned out much, much worse.

Ever since then, the company has been muc wiser for the wear. Management is now hyper-vigilant about staying on top of its new 401(k) vendor. The firm has made sure the vendor got all the documentation right up front, and has made a habit of checking to make sure everything’s adminstered according to the plan documents.

But when the request is for info about a company-sponsored plan affected by ERISA – including your retirement and health plans – it pays to answer as soon as possible. By law, you’re on the clock to issue a reply. Courts can hold your firm liable if management drags its feet responding to questions about eligibility, account balance discrepancies or instructions for filing claim-related complaints.

Phoned-in or written requests

A landmark case (Minadeo v. ICI Paints) spells out how not to handle such requests. When downsizing forced an employee’s termination after 15 years with a company, the firm sent her a letter saying that she’d receive a separate mailing with her pension benefit eligibility info.

The mailing never came. Over the next 11 months, the ex-employee repeatedly called the company to request the info.

When the firm still didn’t provide the information, she had her attorney file a written request, threatening legal action if the firm didn’t comply. Finally, 15 months after she was terminated, the employee received the info – and was told she didn’t qualify for the benefits. She sued.

The company’s defense: The only “formal” info request came from the woman’s lawyer. The other requests came via telephone and were “unofficial.” The court rejected this argument, saying the company was legally bound to respond to the phoned-in requests.

What ERISA requires

Under ERISA, employers have 30 days to respond to information requests by – or on behalf of – a participant. Two ways to comply:

• provide the info, in writing, directly to the plan participant, or

• inform his or her attorney (or other non-beneficiary filing the request) that the info will be released to him or her upon receipt of a consent form signed by the participant.

So what do you do if there’s a third party administrator (TPA) for the plan, but the eligibility info request comes to you instead?

As plan sponsor, it’s the company’s responsibility to direct the request to the TPA, and follow up yourself if you learn there’s been no response. The one thing you should never do is simply assume someone else will answer the request.