Managing a qualified retirement plan can be challenging, especially when it comes to compliance with complex rules and regulations. Here are some common mistakes for Plan Sponsors to avoid when managing a qualified retirement plan:
- Not properly updating plan documents: Qualified retirement plans must have a written plan document that accurately reflects the plan’s terms and conditions. Failure to meet required restatement deadlines and update plan documents to reflect changes in the law or plan operation can result in compliance issues.
- Failing to follow plan documents: Plan sponsors must follow the plan document’s terms and conditions, or they risk violating the plan’s fiduciary obligations. Plan sponsors should ensure their plan operation procedures align with the written plan document.
- Neglecting to provide proper participant communication: Retirement plan participants have a right to receive certain disclosures and notices. Plan sponsors must ensure they provide participants with the appropriate communication in a timely and accurate manner.
- Inadequate oversight of plan service providers: Plan sponsors must ensure that their service providers, such as record keepers and investment advisors, are meeting their obligations under the plan. Failure to oversee these providers can lead to plan errors and non-compliance.
- Failure to monitor plan investments: Plan sponsors must prudently select and monitor plan investments. Failure to do so can result in participants paying excessive fees or being invested in poorly performing investments.
- Inconsistent application of plan rules: Plan sponsors must apply all rules of the plan consistently to all participants. Failing to do so can result in accusations of discrimination or unfair treatment.
- Not meeting the deadlines for contributions and testing: Retirement plans have strict deadlines for making contributions and completing compliance testing. Plan sponsors must adhere to these deadlines to avoid penalties and other compliance issues.
Managing a qualified retirement plan requires ongoing attention and vigilance. By avoiding the common mistakes outlined above, Plan Sponsors can help ensure their plan operates efficiently and remains in compliance with applicable laws and regulations.