Is it my imagination or do we get busier as the fall months come and go at an accelerated pace? Oftentimes, our hectic schedules result in a “priorities first” business model and our 401(k) plan gets put on the back burner. 

Here are 10 tips for plan sponsors that will keep your plan in good order:

1. Employee Contributions

Have all employee contributions been deposited into the plan? Did you forget to offer the opportunity to a participant who became eligible? Plans can self-correct if errors are found within a specific time period.

2. Loans

Are all loan payments being made timely?  It can be tricky when an owner takes a loan from the plan and does not take a regular paycheck to trigger systematic payments.

3. Prior Year Adjustments

Did you have any corrections to make from last year?  Did you deposit all receivables owed to the plan? Keeping on top of plan adjustments will help the plan run smoother long term and easier to administer.

4. Employee Education Meeting

Have you coordinated with your plan consultant to schedule an annual an employee education meeting?  A plan sponsor should host an annual education meeting for newly eligible participants as well as active participants who may not be contributing to the plan at all.  This is also a great time to have participants submit a current beneficiary designation form.

5. Fidelity Bond

Is your ERISA bond current? Should you increase the coverage of your bond?  Bonds should be at least 10% of your plan assets and generally no more than $500,000. This question is asked on the Form 5500. 

6. Safe Harbor Maybe Notice

Does your plan have a Safe Harbor Maybe Notice?  If so, consider if 3% nonelective contribution is feasible for your plan.  If a plan decides against the 3%, the plan will require a ADP/ACP based on current year contributions.  You may want your TPA to run a preliminary ADP/ACP test to see if your plan passes this discrimination test.  A failed ADP/ACP test may result in Highly Compensated Employees getting contributions returned to them.

7. Required Minimum Distributions

Do you have any participants aged 70½? IRS requires 5% owners to start taking annual distributions at 70½.  Active participants age 70½ who are not owners can defer their RMD until they terminate employment. The penalty for a missed RMD carries a staggering 50% excess tax on the distributable amount.

8. Terminated Participants

Does your plan allow involuntary force-outs?  You can choose to force out terminated participants with a balance less than $5,000 to keep your census clean and fees down.

9. Fiduciary Review

Do you know if your advisor is acting as a 3(21) fiduciary?  Do you know what fees you are paying for what services?  Do you hold an annual review meeting and document what was discussed and reviewed? ACG can help you host a successful meeting to review current investment lineup and offer recommendations for possible changes.

10. Plan Document

Is your current plan design working for you?  It is common for big house TPAs to restate a plan document with the exact same plan provisions every six years (IRS requirement).  If your plan was put into place 5-10 years ago, it may be stale.  You may want to revisit eligibility provisions or add a loan provision as a plan.

Looking for guidance on getting your 401(k) plan ready for year-end? ACG can help.