This list is part of a larger report on employee benefit plans that can be found HERE.
In no particular order, here are 19 top plan failures for employee benefit plans.
- Failure to follow the terms of the plan document.
- Failure to update the plan document to reflect recent law changes.
- Failure to satisfy ADP/ACP testing requirements (exclude employees that should have been included, incorrectly thought the plan qualified as a safe-harbor plan, excess funds not returned in a timely manner).
- Failure to use correct plan definition of compensation (may be different for profit sharing contribution, nondiscrimination testing, employee deferral, improperly excluding bonuses).
- Failure to follow matching contribution provisions (exclude eligible employees, wrong definition of compensation).
- Failure to include all eligible employees (member of controlled group so all employees of all members of the controlled group must be considered).
- Failure to limit salary deferral to the 402(g) limits.
- Allowing ineligible employees to participate in the Plan (under age, insufficient length of service, not employed on the last day of year).
- Failure to follow loan provisions per the plan document and IRC Section 72(p).
- Failure to follow hardship withdrawal terms (not confirming person’s eligibility, not stopping salary deferral).
- Failure to start making Required Minimum Distributions to participants that are age 70½.
- Failure to deposit participants’ salary deferrals in a timely manner.
- Unsigned documents or amendments, missing minutes confirming adoption of plan or amendment.
- Failure to obtain a plan audit when required.
- Limited scope audit when full scope audit is required.
- Failure to file the Form 5500 on time.
- Failure to properly value plan assets at their current fair market value, or to hold plan assets in trust.
- Using plan assets to benefit certain related parties to the plan, including the plan administrator, the plan sponsor, and parties related to these individuals.
- Failure to properly select and monitor service providers.
If you have questions about your employee benefit plan, please call Jay Kessler.