Being a plan sponsor comes with a good bit of responsibility. Below are a few helpful hints to keep your plan in compliance, avoid unnecessary corrections, and help to better serve your participants.
Don’t Ignore Participant Complaints – Dissatisfied employees can file complaints that trigger a government audit or file lawsuits that are expensive and time-consuming to handle, even if you win. Though it can seem annoying to deal with, even those participants who no longer work for your firm are entitled to information about their accounts. Try to answer their questions promptly and clearly. Explain any reason for benefit denials and the timing of distribution or loan payments.
Always Report All Your Employees To Your TPA – Though many plans can exclude various classes of employees for benefit purposes, there are lots of regulations that surround how far these exclusions can be applied before becoming discriminatory. Be sure that you report all employees during census collection whether they have chosen to join your plan, or not.
Understand The Correct Compensation To Report – Many plan sponsors assume that W-2 compensation is the only definition that can be used in a retirement plan. There are several definitions and exclusions that can be used for compensation so be sure you know what is in your plan document and discuss proper reporting with your TPA.
Review Your Annual Valuation Report – The professionals at your TPA service provider apply a high level of care to your compliance reporting but an extra set of eyes never hurts. Check salary deferrals and compensation used for compliance testing to your payroll records to ensure that all figures tie to payroll. Spot check dates of birth and dates of hire for accuracy, especially for rehired employees.
Plan Document Records – Be sure to keep a complete set of important plan records, including signed Plan Documents or Adoption Agreements, Summary Plan Descriptions, Compliance Reports, and 5500 forms, as well as any notices to participants, such as safe harbor notices.
Good Intentions Do Not Mean Good Compliance – A famous quote from an ERISA decision many years ago summed it up: “A pure heart and an empty head are not enough”. The IRS and the DOL expect complete compliance, not near compliance or well-intentioned attempts at compliance. Government regulations and requirements change, so keeping up without the help of professional service providers is difficult. Working hand in hand with your TPA firm and reporting accurate data will go a long way to ensure compliance.
Audits Happen To Plans Of All Sizes – Any number of events can trigger a plan audit, including participant complaints or even answers on your 5500 form. Some plan audits are also simply selected at random or can morph into a benefit audit from the corporate auditing division. Whatever the reason, receiving an audit notice can be a bit intimidating. Contact your TPA immediately if you receive such a notice from either the DOL or IRS.
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