Common Errors that Trigger Investigations
1) Federal laws state that deductions from an employee’s paycheck must be submitted to the retirement account within 15 days after the money is withheld from the participant’s paycheck. Failure to make timely remittance to the employee plan.
2) Failure to provide employees with a statement in a timely manner. These statements include information about fees owed to the plans fiduciaries. Some businesses have been found “non-compliant” due to the failure to preserve fidelity bonds for their plans. This is to safeguard against misuse of funds. These deposits cannot be treated like the rest of the businesses cash flow.
Avoiding Expensive Mistakes
Fiduciary responsibilities should be taken seriously. Good record keeping is a good first step in the prevention of errors and avoiding fines. Keep good records of the plans committee actions, what’s discussed, and how any decisions for the plan are made.
A business needs to be realistic about the time it takes to run a plan, the resources it takes, and the knowledge of plan administrators, and should monitor retirement benefit plans themselves. If your business does not have knowledgeable plan administrators you should consider hiring a firm that specializes in retirement plans. Hiring a firm doesn’t mean that you don’t have anything to do with it, you must still monitor the plan to make use that work is done correctly and timely.
401k Issues for the Employer
The Department of Labor is cracking down on employers and in some cases, filing suits to remove plan trustees. The DOL filed these suits to recover unpaid contributions to a 401k plan as well as restore losses to the plan.
These suits are the result of Regulators taking legal action against any employer that is accused of mishandling employee benefit plans mostly due to administrative errors. However, many cases do not result in lawsuits and are due to reporting errors. The DOL offers information and seminars on their website to educate employers in order to prevent reporting errors.
It can be very challenging to administer a 401k employee plan. Errors, though unintentional, may result in substantial problems for both the fiduciaries and the plans participants that may result in fines. Therefore, it’s important for employers to pay close attention to the details of the complex administration of employee retirement plans.