It’s Time for your Retirement Plan Review – Why Not Get Automated?
Say you’ve had the company 401(k) up and running for some time now. So you know there are lot of moving parts, and a lot of moving regulations governing those moving parts. That’s a lot of movement.
To keep things running smoothly, let’s say you and your team perform an annual retirement plan review. If you are like of lot of diligent plan sponsors, you have a list of operational and compliance checks, and you compare those to actual plan activity in the preceding year.
For example, you may review your plan documents to ensure they have been updated to reflect recent changes in the law. You might review hardship distributions to see if the plan’s terms were followed. Or you may make sure that participant loan balances didn’t exceed regulatory maximums or those imposed by the plan. If you automatically enroll employees, you probably (should!) check to see that newly eligible employees received their required notices within the required window.
Retirement Plan Review – Checking Those Boxes
There is certainly no shortage of tasks involved in running a retirement plan review. The IRS has even published a 401(k) Plan Checklist with a dozen important items that should be included in regular reviews. While each is a “simple” yes or no question, it could take considerable time to sift through the data required to answer each of them. For example, answering “Have you timely deposited employee elective deferrals?” or “Were top-heavy contributions made,” might take some digging.
And what if you discover an error or omission during the annual review? Depending on the mistake, fixing the error could involve a corrective distribution or adoption of a new plan amendment. In some cases, the plan may need to engage with the Department of Labor’s Voluntary Fiduciary Correction Program or the IRS correction program.
But what if mistakes or deviations from policy could be discovered in real time?
ForUsAll’s Automated Compliance Monitoring
Thanks to some clever technology, ForUsAll 401(k) can provide automated compliance checks with each payroll cycle. So when a problem surfaces, it can be addressed immediately rather than months later in an annual review.
Here’s how it works: the first step is to connect your payroll with your recordkeeper (by the way, at ForUsAll we can provide a quick and transparent estimate of 401(k) costs with up to three recordkeepers). Our Payroll X-Ray performs 44 unique compliance checks on each employee to identify and eliminate errors before they put your plan at risk.
And ForUsAll automatically performs these checks with every payroll. This reconciliation process alone can really cut down on mistakes since unreconciled payroll and recordkeeping data are a huge source of errors.
The table below lists some of the critical 401(k) tasks that ForUsAll performs or verifies automatically at each payroll cycle.
Retirement Plan Review – Common Tasks & Errors
|Notify employees when they are eligible to enroll in the plan||Failure to send a Summary Plan Description to employees who become eligible to join the plan within 90 days. The notice provides an overview of the plan.|
|Notify employees of QDIA||Failure to alert participants that their contributions will be invested in the Qualified Default Investment Alternative before the first investment and annually thereafter.|
|Notify employees of safe harbor contributions||If you have a safe harbor plan, failure to notify participants of the benefits associated with safe harbor matching or non-elective contributions. If an employee is not given a chance to make an elective deferral to a safe harbor plan, the employer may have to contribute 50% of the excluded employee’s missed deferral.|
|Track loan balances||Exceeding the IRS limitation on loan amounts. The amount of a loan can’t be greater than 50% of the value of the participant’s vested account balance, with a $50,000 maximum.|
|Employee deferrals are deposited in a timely basis||A delay in depositing the contribution to the 401(k). DOL rules require that deposits to the trust should generally be made within 7 business days.|
|Employee contributions are subject to limits, e.g. $18,500 in 2018||Excess contributions were made during the year due, perhaps due to insufficient payroll information.|
|Plan definition of compensation used correctly for deferrals||Inappropriate definition of salary used when making contributions. Your company may define compensation differently for different purposes.|
|Annual reports delivered to participants||Failure to send a Summary Annual Report within 9 months of the plan year-end, or two months after the Form 5500 filing.|
|Maintain accurate end of year census files||Maintaining inaccurate employee data. Errors in census collection can result in inaccurate testing results.|
|f applicable, employee contributions are automatically escalated||Failing to make appropriate employee deferrals, including failing to provide enrollment materials to a newly eligible participant where auto escalation is a feature of the plan.|
Another important aspect of the annual review is evaluating whether or not employees are engaged with the 401(k). Perhaps you offer educational seminars for participants to help them learn more about the company plan, and to encourage them to contribute a meaningful portion of their salary toward their retirement nest egg. An annual review is a good time to investigate whether or not these activities are effective.
At ForUsAll, our award-winning virtual advisor DAVE can walk each employee through their plan options and lead them through their 401(k) plan options. DAVE can help employees customize their investment choices and even change the contribution rate. All this can be done through mobile devices at the employee’s convenience.
DAVE is a big reason that a ForUsAll 401(k) is so user-friendly and hassle-free. That means higher employee engagement, and increased odds of widespread participation in the 401(k). And that means a healthier retirement plan and more financially secure employees.
Upon Further Review
If you are heavily involved in administering the company 401(k), then you may already know that mistakes can happen. After all, that’s why the IRS publishes a “401(k) Plan Fix-It Guide” on their website. But one item you may want to add to your annual review is a review of how much work and liability you want to keep taking on. Are you happy with how much you are doing internally, or would you prefer to delegate more administrative tasks, and some of the liability incurred when offering a retirement plan?
At ForUsAll we are proud to provide our clients full ERISA 3(16) fiduciary services to take on the work and liability for administering your company’s 401(k). Our payroll integration and recurring, automatic compliance checks can reduce many common 401(k) errors, may even shorten your annual review process!
If you are looking to stay focused on your business and outsource your 401(k) plan’s administration to an expert retirement advisor, talk to ForUsAll today.