Retirement Plan Compliance Guidelines You Must Know

The Employee Benefits Security Administration or EBSA is responsible for assuring that all 401k plans are in compliance with the Employee Retirement Income Security Act (ERISA). In recent years, the number of compliance audits conducted by both the IRS and the DOL has increased exponentially. It is the duty of the plan administrator to maintain, understand and ensure compliance to minimize the risk of their plan being audited. Given below is a retirement plan compliance guide that may help you to prevent any compliance issues from arising.

retirement plan compliance time

1) Reviewing Key Documents

There are three main documents that must be maintained, reviewed and retained every year at all costs. One of them is the most recent plan document that includes updated agreements. The other is the plan amendments document that includes any changes as per ERISA. The third one is the latest service agreements with TPAs. It is important for the administrator to not only review these files but also have signed copies of them.

2) Understanding the Plan Document

Every retirement plan will have a set amount of provisions that define the eligibility of participants and the benefits they can gain from it. The administrator must always go through the plan document to understand every aspect of eligibility from age requirements, service requirements to employee classification to ensure that all eligible employees get included in the plan. The document will also contain key information pertaining to the sources of compensation such as bonuses, severance pay, and taxable benefits, etc.

3) Understanding TPA Duties

Misunderstanding TPA’s duties is another reason why a retirement plan compliance issue may arise. To prevent errors from occurring, it is vital to keep a signed copy of the latest service agreements and read them fully to understand its full scope. Calculations related to employer contributions are mostly done by the TPA but some service agreements might indicate that it is the responsibility of the plan administrator to do so. Therefore, it is important to ensure that there is no confusion regarding the duties or it might lead to negligence and compliance issues in the end.

4) Adherence to Regulations

Retirement plans have a ton of rules and regulations to follow and sometimes a few of them might slip through the crack and never get enforced. For instance, most plans have a provision where employees who leave and then get rehired within a set amount of time can gain eligibility for participating in a 401k plan but it is often overlooked by a lot of companies. When it comes to an audit, even the tiniest detail will be under heavy scrutiny.

5) Ensuring Consistency of Day to Day Operations

It’s not sufficient to just have a plan document that meets all the required compliance needs. Day to day operations of the plan must be consistently upheld to all the rules and regulations as per the law. Sometimes, regulations may change before the sponsor is required to make changes to the plan. In such cases, operations might vary from the written terms of the plan. By maintaining consistency in the day to day operations of the plan, both the administrator and the sponsor can better prepare for any hurdle that may come their way.

By ensuring that there aren’t any issues when it comes to retirement plan compliance, everyone benefits, including the business owner and his/her employees. A happy workforce will always be a productive one too. We provide a number of different services such as Form 5500, ERISA compliance, benefits compliance, 401k and our specialty wrap form planning aimed at helping companies keep all their plans in accordance with the rules and regulations set by the IRS and DOL.

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