Many employers sponsor retirement plans to benefit their employees. While there are a variety of plans to choose from, one of the most popular options is the 401(k) plan.
Special guidelines apply to 401(k) plans, and for the companies who have adopted a 401(k) plan, it is important to be mindful of the rules specific to this type of plan. PBMares partner Jackie White comprised a checklist that will help your company handle efficient compliance check ups.
Step 1:Evaluate Service Providers. Make certain they provide regular information and updates, possess all required state and federal licenses, and maintain a fidelity bond if handling plan assets. Provision of services and costs should also be regularly evaluated.
Step 2: Update plans annually. Update plans yearly to reflect recent changes in the law. By not performing an annual check-up, changes in the law might not be addressed, leaving the organization exposed to DOL or IRS repercussions.
Step 3: Deposit 401(k) employee contributions as soon as possible. Employee contributions must be deposited in the 401(k) plan on the earliest date possible, but no later than the 15th business day of the moth following withholding or receipt by the employer. While this is commonly known as the “15 day rule”, the DOL’s position is that “timely” means as soon as it is reasonably possible to segregate participant contributions from the company’s assets.
Step 4: Determine if the plan “passes the tests.” Many plans must satisfy the 401(k) nondiscrimination tests- the Actual Deferral Percentage(ADP) and Actual Contribution Percentage (ACP) tests. If applicable, be certain these tests are performed.
Step 5: File the plan tax return. Form 5500 must be filed in a timely manner through the EFAST system. If the plan requires an audit, the audit must be uploaded with the electronic filing of the Form 5500.
Step 6: Provide information to employees. Employers must provide employees with information about the plans, including plan rules, financial information, investment options, etc. Some of this information must be provided to participants regularly and automatically by the plan administrator. other information must be available on request. All information, however, must be conveyed in writing.