We have put together an ERISA Compliance Checklist that you can follow to make sure you are following the rules.
Does your business offer a qualified retirement plan to your employees? If so, you most likely fall under the guidelines of the Employee Retirement Income Security Act of 1974, otherwise known as ERISA. If you fail to follow the guidelines outlined by ERISA, your company can be subject to investigation and large fines.
If you answer “NO” to any of the following questions it could lead to compliance problems for your company.
1. Are all participants in your plan provided an annual financial report, a summary of the plan and of any changes made to the plan during the year? You should make sure all participants sign for their copy of the plans to assure they received them.
2. Do all participants know who the plan administrator is and that the plan administrator has copies of all plan details they can view at any time?
3. Is your plan protected with a fidelity bond to protect you and the participants from fraud or dishonest administrators?
4. Did your plan make all payments on time and in the correct amounts?
5. Did payments into the plan happen on a timely basis?
6. Did the company, or the administrator, respond to all written requests for information in 30 days or less?
7. Do you have written rules for requesting benefits and appealing denied claims? Did you adhere to the rules?
8. Is the plan diversified to protect the investments of participants?
9. Are the investment plans reviewed to make sure they are done in the best interest of the participants?
10. If the plan allows for participants to choose their own investments, are they provided with proper and full information to make informed decisions?
Similarly, if you answer “YES” to any of the following questions you may be in jeopardy.
1. Have any plan assets were used to pay expenses that were not authorized, excessive or unreasonable?
2. Has any official or administrator of the plan used funds from the plan for their personal benefit?
3. Has the plan invested in the company or any plan officials?
This short ERISA compliance checklist should get you started thinking. Let us dig a little deeper into a few of the concerns.
Your company plan is closely monitored by the IRS. If they determine you have not been following the rules setup in your plans guidelines, the IRS can invalidate the entire plan eliminating tax advantages to both the company and participants. For this reason, we should discuss a few key elements.
All current participants, beneficiaries and terminated employees should be receiving an annual fee report. Additionally, if you plan to make any changes to your plan, you must notify them 30 to 90 days in advance of the changes taking affect.
What constitutes timely deposits? The federal guidelines suggest you should make deposits into the plan no later than the same time you pay payroll taxes. Ideally, payments into the plan are made as quickly as possible.
Another area to watch closely is your “eligible to enroll” employees. You must make sure they are provided all paperwork, information and the opportunity to enroll at the time outlined in your plan.
Does your plan allow employees to take out loans? If so, make sure this area is closely monitored for proper repayment of loans as stated in your plan’s guidelines. Failure of a participant to repay the loan on time can result in forfeiture of their tax benefits.
One area which is carefully evaluated during audits is employer matching contributions. Make sure all contributions from the company have been properly allocated to the correct employee. This can be particularly challenging in companies with variable contribution amounts.
Non-Discrimination – You should verify that both your plan and the company’s practices adhere to 401(k) ADP and ACP discriminatory tests. These tests verify the plan does not favor business owners, the company, or higher-paid employees. Fairness is required in all plan details.
Verify all deferrals in excess of plan rules are distributed back to the appropriate participants.
It is advised you have your entire plan reviewed by an expert in ERISA compliance on a regular basis. Laws and IRS Rules change almost every year making an annual review of your plan a necessity.
Using our ERISA compliance checklist and discussion, you can keep your company retirement plan in compliance and be prepared for your next review or audit.