12 Plan Mistakes That Could Have the DOL Knocking on Your Door

12 Plan Mistakes That Could Have the DOL Knocking on Your Door

| February 08, 2017

No one likes to make mistakes—especially retirement plan mistakes that can result in costly fines or even litigation. In 2016, the Department of Labor collected nearly $777.5 million for plan restorations, penalties and fines. Here’s the DOL breakdown:

  • 2,002 DOL investigations closed, with
  • Nearly 67.7% resulting in monetary compensation for plans or other corrective actions; and
  • 144 cases referred for litigation.

Violations often result from plain oversight, errors or omissions on the employer’s part, resulting in an audit headache and financial pain. This is why employers must be proactive and vigilant in avoiding plan mistakes. By being aware of these 12 “usual suspects,” employers can save a lot of time and trouble.

Plan fiduciaries most commonly fail to:

  1. Update the plan document with the mandatory retirement plan law changes.
  2. Follow the terms of the plan document.
  3. Use the same plan definition of compensation for handling all plan contributions and allocations.
  4. Make employer-matching contributions to all the appropriate employees.
  5. Apply Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) non-discrimination test results to highly compensated employee (HCE) contributions, resulting in excess HCE contributions in the plan.
  6. Include all eligible employees in the plan, resulting in a lost contribution opportunity for some employees.
  7. Comply with contribution rules and distribute excess contributions back to employees.
  8. Routinely and promptly deposit employee contributions.
  9. Ensure employee loans meet the requirements of the plan documents.
  10. Handle financial hardship distributions properly.
  11. Make the required minimum employer contributions for top-heavy plans.
  12. File the required annual Form 5500 return or distribute the annual Summary Plan Description to all plan participants.

For employers who want more details about staying compliant, or suspect they have made a plan mistake, many resources are available to help right these wrongs.

*The DOL Fact Sheet may be viewed here 

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