According to the DOL, the #1 most common 401(k) plan violation is the failure of the trustee to remit employee 401(k) contributions in a timely manner.
There are good and bad aspects to offering your employees a 401(k) plan. Like any successful business owner, you have worked hard to get your business to a place where you can offer your employees the benefit of a great savings plan. You may also contribute to their plans. You understand that there is a little extra paperwork, some administrative work and fees, but your 401(k) plan and your matching contribution helps make your workplace a more attractive place to work.
Be careful! Remember, you as the business owner may still retain fiduciary responsibility over your plan even if you ask others to deal with administration and compliance. Despite all the work that goes into setting up a 401(k) plan, what business owners (trustees) don’t know is just how little it takes to lose your plan’s tax-qualified status.
If you’re like most employers, every pay period you generate information or a report with deductions, loans, demographic updates, and then transfer the necessary data and funds to your retirement plan provider.
This may work well but what’s your back-up plan if your staff happens to be unavailable on the day when your 401(k) contribution files are due? Who’s knowledgeable and qualified enough to fill in during that time? And if someone else cannot handle the process, what is the impact of not getting these updates or contributions to your 401(k) provider on time? You would probaly be surprised how many businesses find themselves in a situation like this, and how it can increase the risk of noncompliance.
In 2013, roughly 73% of Department of Labor (DOL) investigations of company’s 401(k) plans resulted in monetary fines or corrective action. According to the DOL, the #1 most common 401(k) plan violation is the failure of the trustee to timely remit employee 401(k) contributions. If you know you don’t have quite a firm grasp on your 401(k) management procedures, you may run the risk of non-compliance?
Often enough, violations that cause plans to lose their tax-qualified status usually amount to little mistakes stemming from simple human error that can easily be avoided.
Time & Pay offers a variety of solutions to make sure you don’t have a run-in with the DOL.
Our systems can automatically calculate the employee’s contribution and the employer’s match and make sure it is correctly treated as a pre- tax deduction. Our system will submit that payment in a timely manner to your 401(k) plan provider.
Better yet, our new Benefits Enrollment system goes even farther by automating the connectivity between the employer, your employee and your 401(k) provider giving you with the means of easily collecting employee and payroll data and securely delivering it to your provider on- time, every time, no matter what or when changes are made.
When you have the proper systems in place, being able to keep your payroll data consistent with your provider’s records will ultimately prevent administration hiccups when calculating employee remittance data, when submitting annual paperwork to the IRS and information to your provider.
At Time & Pay, we understand why you offer your employees that 401(k) and the importance you place on the plan in making your business a better place to work. Don’t be a part of that 73% percent of employers who end up being penalized by the DOL. Don’t lose the ability to offer this great benefit your your employees. Conatct Us today to find out how Time & Pay can make offering a 401(k) plan to your employees easy and hassle free.