Being a plan sponsor comes with a good bit of responsibility. You’ve taken the important step of hiring a third-party administration firm to help you navigate the myriad of processes that are required to keep your plan in compliance with applicable regulations. 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. If you need guidance when approached by your participants, do not hesitate to contact your TPA.
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. If you have an automatic payroll feed to your TPA, you’ve really nailed this one!
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.
Upcoming Compliance Deadlines for Calendar-Year Plans (12/31)
| September | ||
|---|---|---|
| 15th | Required contributions are due for pension plans (Money Purchase, Target Benefit, and Defined Benefit plans) that end on the calendar year. 2017 profit sharing or matching contributions for calendar fiscal years for plan sponsors who filed a corporate tax extension are also due. | |
| 30th | Summary Annual Report (SAR) due to participants or beneficiaries receiving benefits under the plan as of the 12/31/2017 plan year end. The SAR is due on 9/30 (nine months after the plan year end) for calendar year plans that have not extended the due date of Form 5500. | |
| October | ||
| 1st | For 401(k) plans that will elect to utilize safe harbor provisions for 2019, the safe harbor notice must be provided to participants between October 1st and December 1st. | |
| 15th | Deadline for filing Form 5500 for those calendar year end plans on extension. Deadline for filing Form 8955-SSA for those calendar year end plans on extension. | |
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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