Planning for your employees’ retirement can be scary. Mistakes are easy to make, and consequences can be costly.
We’ve prepared this reference guide with common scenarios and solutions to alleviate any stress you may come across in your planning process.
I forgot to file my Form 5500, and the deadline has already passed.
If this is the case, you will receive a penalty letter from the Internal Revenue Service (IRS). We understand that these letters can be scary, so we are here to help.
If you receive one of these letters, contact LRS immediately. We offer a service to respond to these IRS inquiries on your behalf. Although you do have the option to respond yourself, we recommend having our experts reply to receive the best results.
My employee became eligible and completed the enrollment form, but I forgot to start making the deductions.
Here are the steps that Leading Retirement Solutions will need to take:
- Review the plan document sections on eligibility and participation. Check with LRS to verify when employees should have entered the plan.
- Make a qualified non-elective contribution for the employee that compensates for the missed deferral opportunity.
- Regularly monitor census information and apply participation requirements, going forward.
The IRS and Department of Labor love to see processes in place to help ensure that this type of mistake doesn’t happen again.
My plan failed the 401(k) ADP and ACP nondiscrimination tests.
In order to find where the mistakes are, LRS will need to conduct an independent review to determine if highly and nonhighly employees are properly classified.
To resolve this issue, make qualified nonelective contributions for the nonhighly compensated employees.
Going forward, consider a safe harbor or automatic enrollment plan design. Communicate with plan administrators to ensure proper employee classification and compliance with the plan terms.
I didn’t use the plan definition of compensation correctly for all deferrals and allocations.
Review the plan document definition of compensation used for determining elective deferrals, employer nonelective and matching contributions, maximum annual additions and top-heavy minimum contributions. Review the plan election forms to determine if they’re consistent with requirements detailed in the retirement plan legal documents.
To fix this, LRS will utilize corrective contribution or distribution.
In the future, perform annual reviews of compensation definitions and ensure that the person in charge of determining compensation is properly trained to understand the plan document.
You may have realized by now that if you find yourself in a stressful situation, the best thing to do is simply take a deep breath, pick up the phone and call Leading Retirement Solutions. We are here to provide assistance whenever you may need it.