13 Apr April 13, 2015

19 Top Employee Benefit Plan Failures

This list is part of a larger report on employee benefit plans that can be found HERE.

In no particular order, here are 19 top plan failures for employee benefit plans.

  1. Failure to follow the terms of the plan document.
  2. Failure to update the plan document to reflect recent law changes.
  3. Failure to satisfy ADP/ACP testing requirements (exclude employees that should have been included, incorrectly thought the plan qualified as a safe-harbor plan, excess funds not returned in a timely manner).
  4. Failure to use correct plan definition of compensation (may be different for profit sharing contribution, nondiscrimination testing, employee deferral, improperly excluding bonuses).
  5. Failure to follow matching contribution provisions (exclude eligible employees, wrong definition of compensation).
  6. Failure to include all eligible employees (member of controlled group so all employees of all members of the controlled group must be considered).
  7. Failure to limit salary deferral to the 402(g) limits.
  8. Allowing ineligible employees to participate in the Plan (under age, insufficient length of service, not employed on the last day of year).
  9. Failure to follow loan provisions per the plan document and IRC Section 72(p).
  10. Failure to follow hardship withdrawal terms (not confirming person’s eligibility, not stopping salary deferral).
  11. Failure to start making Required Minimum Distributions to participants that are age 70½.
  12. Failure to deposit participants’ salary deferrals in a timely manner.
  13. Unsigned documents or amendments, missing minutes confirming adoption of plan or amendment.
  14. Failure to obtain a plan audit when required.
  15. Limited scope audit when full scope audit is required.
  16. Failure to file the Form 5500 on time.
  17. Failure to properly value plan assets at their current fair market value, or to hold plan assets in trust.
  18. Using plan assets to benefit certain related parties to the plan, including the plan administrator, the plan sponsor, and parties related to these individuals.
  19. Failure to properly select and monitor service providers.

If you have questions about your employee benefit plan, please call Jay Kessler.