Although we have seen incredible advances in technology and automation, retirement plan mistakes seem as frequent today as they were years ago. As auditors, our purpose is to ensure that retirement plans are run properly, in accordance with the plan document. Here are the top three errors we find when conducting our audits:
- What counts as compensation? – Most plans define compensation as W-2 wages, but what happens when the payroll system is not set up to calculate contributions that follow that same definition? We notice errors most often in companies that have several types of compensation (for example, commissions, fringe benefits, bonuses). More than anything, errors occur when companies make changes to their payroll system, such as adding new compensation codes, without thoroughly considering the impact on the retirement plan.
- Who is eligible to contribute? – Many plans require employees to work 1,000 hours before they become eligible to participate in the retirement plan. But what date should that measurement period begin and end? And what about part-time and seasonal employees who fall in and out of eligibility? The answers will depend on how the retirement plan defines these key terms.
- Late remittances – Contributions withheld from employee paychecks must be deposited in the plan as soon as “reasonably practicable” do so, but in no event later than the 15th business day of the following month. This is a perennial hot-button of the DOL. We see this deadline missed most often when a key HR or accounting staff goes on vacation or when staff responsibilities are changed around within the company.