The first common error highlighted in the IRS 401(k) Fix-It Guide is the failure to maintain the plan document. All qualified plans are required to have a written plan document. As laws change due to Congressional or regulatory action, employers are required to update their plan document to conform to new laws. About once every five to six years, every plan is required to be restated in its entirety to reflect all law change since the last restatement.
No one wants to make mistakes in their 401(k) plan, but unfortunately mistakes do happen. The IRS knows this. For this reason the Employee Plans Compliance Resolution System (‘EPCRS’) has been created to provide business owners a mechanism to fix mistakes they have made.
When a plan elects to correct a failing ADP or ACP test via refunds, a two-step process sometimes called the “leveling method” is used. The method presented below describes the process for an ADP test failure, but a similar process works for ACP test failures as well. In the first step, the contributions of the … Read more
The introduction of EFAST2 for 2009 Form 5500 filings ushered in a number of changes to the Form 5500, accompanying schedules, and attachments. One of these changes was the removal of the Schedule SSA from the Form 5500. The Schedule SSA is where the benefits for terminated employees with a vested accrued benefit or vested account balance are collected for the Social Security Administration.
Some 401(k) TPAs outsource some of their work to independent contractors, to US based outsourcing firms, or international outsourcing firms. There is nothing wrong with outsourcing, but plan sponsors and trustees have the right to know about such arrangements before retaining a third party administration firm. In some cases, outsourcing is used to reduce cost or smooth out workflows. In other cases, a small TPA firm may occasionally use an independent contractor to perform peer review to ensure the quality of their work product and that the TPA firm is keeping current with all laws and industry developments. Or, a 401(k) TPA may engage an outside expert to assist on specialized engagements.
IRS tax settlement company ads are running all of the time on TV. “Has the IRS put a levy on your bank account? Has the IRS garnished your wages? Are you being hounded for unpaid taxes?” Watching these commercials, it would be easy to get the impression that the IRS is an unhelpful, unmerciful government bureaucracy.
In industry speak, 401(k) third party administrators (TPAs) fall into two broad categories: producing TPAs and non-producing TPAs. Neither of these is necessarily better. These are just two different business models.
While fees should never be the sole determinant of choosing any vendor or product, fees are always relevant. Sometimes it is hard to unravel 401(k) TPA pricing even when TPA firms fully disclose their pricing, and any indirect compensation that the TPA firm may receive. Additionally, sometimes the employer has to consider which expenses the employer should bear and which expenses participants should bear. It is easy to see this with a couple of examples.
Some record-keepers pay 401(k) TPAs revenue sharing to help TPAs keep plan document and administrative fees charged to mutual clients lower. Each record-keeper’s program varies in which TPAs qualify and how the amount of revenue sharing is calculated. Many TPAs have some clients where they receive revenue sharing and some where they do not. There are several ways that TPAs handle revenue sharing amounts.
Nova 401(k) Associates is pleased to be launching its Resource Center. The Resource Center will contain articles about retirement plan issues that affect our clients. The Resource Center will contain information about breaking news as well as reference articles.