A retirement plan is important to your business — and to all the employees relying on it for income later in life. However, mistakes and confusion can turn retirement plans from an attractive benefit into a liability.
A properly administered retirement plan avoids unnecessary costs and administrative problems, and ultimately mitigates liabilities for plan fiduciaries. The IRS recommends periodic plan reviews as part of proper administration and recently released a short bulletin with helpful tips and information about how to create and implement a retirement plan checkup.
A plan checkup should include a review of your plan documents and communications. A comprehensive review will confirm that the plan’s current terms are being administered correctly and that the current plan language still makes sense and isn’t unnecessarily limiting based on practical administrative considerations. Unintentional fiduciary breaches typically involve administration issues like delinquent deferral remittances, a definition of compensation that’s inconsistent with the definition expressed in the plan document, missed participant notifications or misinterpreted eligibility provisions (such as confusing “hours of service” with “elapsed time”).
These errors can be time-consuming and costly to resolve — but when recognized early, it’s easier and less costly to resolve them. The IRS and the DOL offer voluntary correction programs to help you. Under certain circumstances, a company may self-correct administrative errors internally without informing the IRS, based on their self-correction program.
There is no substitute for proper administration of your retirement plan, but some document language is cryptic. Accidents can go unnoticed, and most plans can benefit from assistance in interpretation to ensure proper administration of the provisions in their plan document.
A second perspective can be invaluable. For assistance reviewing your plan, please contact your advisor.