Why It Matters

 

Many plan administration issues are not intentional—they result from changes in payroll, employee status, internal processes, or simple human error.

 

Regularly reviewing how your plan is actually being administered against its governing documents can help identify discrepancies, simplify year-end administration, and reduce potential compliance risk.

 

Practical Ideas to Consider

 

✔ Review employee eligibility
Confirm that eligible employees are being identified and given the opportunity to participate according to the terms of your plan.

 

✔ Check contribution timing
Employee deferrals should be deposited into the plan as soon as they can reasonably be segregated from the employer’s general assets, subject to applicable Department of Labor requirements. Review your payroll-to-deposit process for consistency.

 

✔ Double-check employer match calculations
Make sure your payroll system and recordkeeper are applying the matching formula described in your plan documents, including the appropriate definition of compensation.

 

✔ Look for—and address—operational mistakes
Errors can happen. Identifying them early and working with your plan’s service providers to determine the appropriate corrective action can help prevent a small issue from becoming a larger one.

 

A Common Mistake We See

 

Employers sometimes assume that because payroll and the recordkeeper are automated, the plan is automatically being administered correctly. Technology can make administration easier, but plan sponsors should still periodically verify that systems, payroll data, and plan provisions are aligned.

 

A Simple Takeaway

 

A mid-year operational checkup can help catch small issues early, reduce compliance risk, and make year-end administration easier.

 

 

The Guardian 401(k) Advantage is a monthly newsletter that answers key questions and delivers practical ideas to help you make informed decisions, support your employees, and stay compliant.