Establishing a 401(k) Plan for your employees is a great benefit, but employers must be aware of their fiduciary responsibilities. To ensure your Plan is compliant and running well, consider the following best practices.
- Plan document review
- Every six years the Internal Revenue Service requires that Plan Documents be restated to properly reflect changes that may have occurred since the last plan restatement. Amendments that may have been made, are captured in the newly updated plan document. This also provides the Plan Sponsor the opportunity to make certain that the Plan is operating in accordance with the Plan Document. Plan management can remedy any provisions that are not intended. Some areas to carefully review are eligibility, compensation and benefit payments.
- Non-discrimination testing
- Your Third Party Administrator performs non-discrimination annually, as required under the terms of your Plan. Depending on the terms of your plan, corrective distributions or contributions may be due to or from participants. Plan management should be aware of the terms of your Plan to avoid any surprises.
- Changes in annual contribution limits
- Review payroll to make sure that participants who desire to defer the maximum allowed by law, are properly set up in the payroll system to achieve this goal. Determine on an annual basis that participants eligible to make catch-up contributions are identified and provided an opportunity to make additional deferrals.
For additional questions related to this or any topic, please contact your TBC Advisor.