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Question: What are some common retirement plan mistakes you see with your clients?
As a retirement plan sponsor, you carry a fiduciary responsibility for the company’s retirement plan to ensure the plan maintains its obligations to its plan participants. As retirement plan service providers, here are three common retirement plan mistakes we see with our clients:
1. Missed deferral opportunity. Ensure you are providing employees with their enrollment materials and summary plan descriptions before they are eligible to participate. If an employee is not given the opportunity to make retirement plan contributions until after their entry date, you must take corrective action to correct the missed deferral opportunity.
2. Correct compensation definition. Review your retirement plan document to determine if the correct definition of compensation is being used to calculate employee deferrals, employer matching contributions and employer profit-sharing contributions. Some plan documents exclude specific types of compensation such as bonuses and commissions. The correct compensation must be provided to your third-party administrator and recordkeeper for compliance testing and contribution allocations.
3. Late deposits. Work with your third-party administrator and recordkeeper to establish procedures so that employee deferrals, loan payments and employer contributions are deposited into retirement plans on a timely basis. The deposit due date for these contributions varies depending on the number of participants in the retirement plan and the type of contribution. If contributions are deposited late, you must take corrective action to keep the retirement plan in compliance.
If you’re unsure whether your retirement plan is compliant, we encourage you to work with a third-party administrator to conduct a compliance review. To obtain assistance with managing your retirement plans, contact Doeren Mayhew today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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