Total Team Solutions Blog

Common 401(k) Employer Mistakes

By: Rob Lynn

Administration of a 401(K) plan can be complex with many compliance hazards that the employer can easily run into. Those servicing a 401(K) plan such as the third party administrators, record keepers, and financial advisors are hired to help the employer avoid most hazards.  When mistakes are made, it is the employer who is ultimately responsible and who will suffer any consequences or penalties. So what are the most frequent mistakes according to Investment News:

1. Late deposits of contributions – This issue is the most popular reason the DOL fines a plan. The rule is no later than the 15^th day after but sooner if the funds can be segregated before. If the plan establishes a pattern, missing that deadline can cause red flags. Integrating the 401(k) plan with payroll helps.
2. Not following plan documents –Don’t read your plan documents at your peril and don’t assume your service providers will insure you are following them. Not including eligible employees especially if plans use auto enroll. 
3. Safe Harbor Plans – Notices have to go out annually 30-90 days before the end of the year.
4. Fidelity Bonds – All plans need bonds amounting to 10% of assets which should not be confused with fiduciary insurance.
5. Salary Limits – Employees may defer up to a certain percentage of their salary but only up to a certain limit.
6. Improper Loan Servicing – ensuring loan repayments adhere to repayment horizons and payment schedules.
7. Untimely 5500 Filings – Though most record keepers or TPAs provide signature ready 5500 forms, ultimately plan sponsors are responsible for timely and accurate filing of these forms.
8. Top Heavy Contributions – Making payments for “Key Employees” whose plan is “top-heavy” or where they hold more than 60% of a 401(k) plan’s total assets.

The key to running a clean 401(k) plan without too much work or liability is hiring the right providers but making sure that these vendors are doing their job accurately and in a timely fashion.  With Total Team Solutions 401(k) plan, the fiduciary risk for compliance is greatly reduced, because Total Team Solutions is the fiduciary of the plan and therefore ultimately responsible for the plan’s compliance. For the past 25 years, Total Team Solutions has provided our clients with a top of the line and cost effective 401(k) plan that keeps the employees happy and the clients headache free.  To learn more about the TTS plan, please contact Rob Lynn at rlynn@ttspro.com  

 

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