Posts Tagged ‘pension plan’

Don’t Let These Common Retirement Plan Mistakes Hurt Your Business

Monday, March 28th, 2016
Administrative Mistakes | Retirement Plan Sponsors | Ohio CPA Firm

Even data entry gurus aren’t immune to making mistakes and, as many of us are already aware, it only takes a minor slip up to cause major havoc – especially where your plan contribution records are concerned. Read on to discover some common administrative mistakes retirement plan sponsors should know about and how to avoid them moving forward.

When it comes to saving for retirement, your employees trust you to help them get their finances in order. Don’t undermine their trust by making mistakes that could have been easily avoided. Instead, take a proactive approach to the administrative responsibilities you are expected to manage. Keep reading to discover three areas retirement plan auditors are checking for mistakes and what you can do to avoid future issues.

Enrollment

Pay close attention to your plan’s eligibility requirements. The enrollment dates for some employees can get confusing. Consider the following example.

According to your plan document, in order for an employee to enroll in your company’s retirement plan, they must be at least 21-years-old and have had worked for you for at least six consecutive months. Once they have met these requirements, they can enroll during the plan’s entry dates, which fall on the first day of each quarter.

Considering this scenario, on what day will you be able to enroll “John” into your company’s retirement plan if:

  • He was hired March 17, 2016
  • His birthday is Oct. 25, 1995

While it’s true that John will meet the 6-month employment requirement on Sept. 17, he’s unable to meet the age requirement. When he turns 21 on Oct. 25, he will still have to wait until the first day of the next quarter – Jan. 1, 2017.

If an employee misses the opportunity to participate as a result of an error made by the plan sponsor, the employer is required to correct the mistake by making a corrective contribution.

This common mistake can easily be avoided as long as your business has solid processes in place to determine the appropriate for all new employees who are choosing to enter into the plan.

Contributions

Even data entry gurus aren’t immune to making mistakes and, as many of us are already aware, it only takes a minor slipup to cause major havoc – especially where your plan contribution records are concerned.

When you manually enter your employee’s retirement plan contributions, you become vulnerable to data entry errors. It’s not uncommon for a wrong keystroke to lead to deposits being made into the wrong employee’s account, for example.

Fortunately, this mistake is easily avoidable if you take steps toward automation. Ask your payroll company if they can create a file that can be easily uploaded to your retirement plan’s record keeper in an automated format and save yourself any future data entry headaches.

Compensation

It’s very important to be clear about what your plan document considers to be compensation. For example, if your plan document makes a point to reference “W-2 compensation,” you are required to withhold retirement plan funds from all regular wages, bonuses, commission, overtime, etc. This means, that if you pass out performance bonuses and neglect to withhold their 401(k) contribution, your document has failed and your business is opened to unpleasant consequences.

Fortunately, it’s not too late. Your plan document most likely offers the flexibility to make a separate plan election on bonuses. If your employee does decide to elect a portion of their bonus to the plan, ask them to document the election request for your records as well as their own.

Mistakes happen, but you can minimize the chance of making some pretty major mistakes simply by adopting a more proactive management style. The tips above will certainly help you get started. But for even more, email Rea & Associates today.

By Steve Renner, QKA (New Philadelphia office)

Get more retirement plan advice for your business. Check out these articles:

How Your Plan Design Can Help Improve Your Retirement Plan Participation

13 Fees That Can Kill Your Retirement Plans

Retirement Plan Participants Are Content To Watch Their Savings Simmer

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What Are Some Changes Plan Sponsors Can Expect To See In 2014?

Tuesday, November 26th, 2013

Every fall, just as we can expect the leaves to change colors and the weather to turn colder and a little dreary, we can also anticipate changes we will see coming in the following year with respect to employee benefit plans.  (more…)

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Why is the Timeliness of Employee Contributions Under Scrutiny?

Friday, May 3rd, 2013

The Department of Labor (DOL) has focused on the timely remittance of employee contributions to retirement plans for a few years. And recently, they stepped up efforts during agency-conducted audits, making this a key area of detailed review. The timeliness of your remittances will be under the microscope, and not only the frequency, but also the consistency. (more…)

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What Does ASU 2011-04 Mean For Your Pension Audit?

Thursday, February 7th, 2013

How to Prepare For Changes to Your Retirement Plan

While the basics of double entry accounting haven’t changed in hundreds of years, the devil, as they say, is in the details. And, when it comes to accounting, the details are always changing. A new accounting standard update has been announced – and it could have a big impact on your pension plan’s 2012 audit.

For the last decade, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working toward accounting convergence; bringing U.S. accounting standards into harmony with international requirements. Through the Accounting Standard Updates (ASUs), FASB has been nudging U.S. standards closer to their international counterparts. Think of it as the accounting equivalent of finally getting America to convert to the metric measuring system. It’ll be great once we’re all on the same page, but the process of getting there… well, it’s a little complicated.

Here’s what you need to know about ASU 2011-04 and what you can do to prepare for its impact on your retirement plan. (more…)

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Employee Welfare Benefit Plans Making Your Head Spin?

Friday, December 28th, 2012

Every year, we receive questions regarding whether a filing requirement exists for a client’s welfare benefit plan. Clients want to ensure that their plans remain ERISA compliant without taking on the burden of any unnecessary paperwork.  Here are answers to some of the most frequently asked questions about employee welfare benefit plans. (more…)

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Are You Ready For FASB 715-80 Disclosures?

Thursday, December 13th, 2012

From ERISA fee disclosures to benefit limitation regulations, 2012 has been a year of regulations for retirement plans.  If your company offers a retirement plan, you may feel like you’ve spent the whole year jumping through the hoops that regulators threw at you.  Bad news, you might have one more hoop to hop. (more…)

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What Changes Do Pension Plans Need by Year-end?

Thursday, November 29th, 2012

In the midst of the publicity surrounding the new ERISA fee disclosures requirements, it is important not to lose sight of the fact that other recently enacted legislation may impact your retirement plan.  Changes to IRS regulations may require plan’s to adopt amendments before the end of the year.  (more…)

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Do You Need to Send an Annual Notice to Your 401k Participants?

Friday, November 2nd, 2012

Does your 401k plan have a calendar year end? If so you have until December 1, 2012, to send notice requirements to plan participants or the operation or qualification of your plan could be impacted. Use this checklist of notices to get started: (more…)

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Who is Responsible for Fidelity Bonding?

Friday, October 26th, 2012

When it comes to following the ERISA requirement of fidelity bonding, the devil, as they say is in the details.

The Employee Retirement Income Security Act of 1974 (ERISA) requires that fidelity bonding be obtained to cover each person who “handles” plan assets.  The general rule is the bond amount be ten percent (minimum of $1,000) of plan assets as of the beginning of the plan year, not to exceed $500,000, or one million dollars if the plan holds employer securities.

While this requirement seems relatively straightforward, we find plan sponsors are sometimes unclear about their fidelity bond responsibilities when we are performing  benefit plan audits.   Following are some of the commonly asked questions. (more…)

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Will You Be Ready for Retirement?

Wednesday, October 10th, 2012

You may have heard the retirement terminology “three-legged stool” used to describe the three most common sources of retirement income: Social Security, employer sponsored retirement plan and personal savings. Many factors affect the strength of each “leg,” so you must continually evaluate what changes you need to make to keep the stool strong and upright. (more…)

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