Retirement Plan Benefits Compliance Series

RetirementPlanWhat better way to spend spring 2015 than conducting an internal review of your company’s retirement plan benefits? Does your plan actually meet the needs of your employees? What about administration and compliance? Reduce your fiduciary risks by simplifying plan management or plan design. Or, if you do not offer a plan, perhaps now is the time to improve your recruitment and retention efforts by adopting even a basic plan. Some employers find this compelling, particularly in light of medical benefit reductions or cost increases due to health care reform.

Most major U.S. employers sponsor a 401(k) plan for their employees. The second most popular defined contribution retirement plan is the 403(b) plan. While the 403(b) plan is restricted to non-profit employers, in 1997, the Small Business Job Protection Act authorized certain non-profit employers to sponsor 401(k) plans for the first time. If you are considering a retirement plan change, be certain to avoid unnecessary agency fees and penalties by making the transition in a compliant fashion.

1. Has your plan document been updated within the past few years?

2. Are the plan operations based on the plan document terms?

3. Is the plan definition of compensation for all deferrals and allocations used correctly?

4. Were employer matching contributions made to appropriate employees under the plan terms?

5. Has the plan satisfied the 401(k) ADP and ACP nondiscrimination tests?

6. Were all eligible employees identified and given the opportunity to make an elective deferral?

7. Are elective deferrals limited to the IRC Section 402(g) limits for the calendar year?

8. Have you timely deposited employee elective deferrals?

9. Do participant loans meet the plan document and IRC Section 72(p) requirements?

10. Were hardship distributions made properly?

11. Were top-heavy minimum contributions made?

12. Was Form 5500 filed?

The Internal Revenue Service offers a very helpful tool that employers can access directly from the IRS website. This is the 12-Point 401(k) plan review. It is well constructed and very much in line with the process that MSEC’s for-fee ERISA consulting services uses when assisting members. While we fully expect the IRS to change and update their checklist over time, we provide a copy of it here for your review and potential use. To use the interactive features of this tool, click here. You can see how valuable some of these high-level questions can be in helping you ensure that your plan is being properly managed.

While this is a helpful 401(k) tool, we strongly encourage employers to conduct a thorough compliance review for each 401(k), 403(b), profit sharing, money purchase, or defined-benefit plan you offer. Clean up your fiduciary cobwebs this spring, so you can enjoy the future confident that you will pass any Department of Labor or IRS retirement plan audit without any need to divert staff and business resources on an emergency clean up once that Notice of Audit arrives.