Top 10 Employee Benefit Plan Considerations for 2015
Plan sponsors should consider the following issues when contemplating their benefit strategy and compliance for 2015.
1. Remit employee deferral contributions in a timely manner.
Regulations require that employee deferral contributions be remitted to the trustee or custodian as soon as they can be reasonably segregated from the employer’s assets but no later than the 15th business day of the month following the payroll date.
2. Forfeiture balances should be used annually.
Plans that include vesting provisions allowing accumulation of forfeitures throughout the year should follow the plan document’s forfeiture provision. On an annual basis, all forfeitures should be used or reallocated to participants in accordance with the plan document or the plan may have an operational failure that will require correction.
3. Re-examine internal control structure.
Fiduciaries of retirement plans should be aware of the internal controls at their organization related to operation of their benefit plans. As a plan sponsor, administrator, or trustee, you are considered a fiduciary under ERISA. As such, you are subject to certain fiduciary responsibilities, and with these responsibilities come potential liability. One way to meet your fiduciary responsibilities is by implementing effective internal control over financial reporting.
4. Review plan documents.
Plan documents should be examined to ensure they are up to date with all required amendments and changes in administrative practice. This includes aligning the information in the summary plan description with the plan document and incorporating the impacts of any amendments into summaries of material modifications.
5. Consider provisions to encourage participation.
Adding provisions regarding auto enrollment or auto escalation can encourage participants to take full advantage of the retirement plan. These features should increase participation and improve your discrimination testing results.
6. Re-examine administrative fees.
Part of a fiduciary’s responsibility is to ensure fees being paid by the plan are reasonable. This evaluation should be a documented process that is performed annually. Don’t forget that fee notices are required to be sent out annually to participants.
7. Review fidelity bonds.
Fidelity bonds are required for individuals handling funds as well as fiduciaries of the plan. The amount of the fidelity bond should be 10 percent of plan assets up to $500,000. These bonds should be reviewed annually to ensure that the minimum required coverage is met and deemed appropriate.
8. Lost participants need to be found.
Fiduciaries need to make a reasonable effort to track down lost participants to distribute funds or send fee notices. At a minimum, this should include certified mail, checking employer records, checking with the designated beneficiary, and using free internet search tools. The use of individual retirement accounts, federally insured bank accounts, and state unclaimed property funds should also be considered for distributions.
9. Track required minimum distributions.
Fiduciaries should review their administrative procedures and agreements to ensure that required minimum distributions are being tracked and executed. Failure to make required minimum distributions can result in penalties for the account owner including a 50 percent excise tax.
10. Review small balance distribution procedures.
Plans frequently have a provision to distribute small account balances immediately upon a participant’s termination. At a minimum, this should be done on an annual basis. This will decrease the number of participants in the plan which translates into fee savings.
How we can help
CliftonLarsonAllen advisors can answer questions you may have about any of these issues. Our employee benefit group helps plan sponsors stay in compliance with all aspects of the Employee Retirement Income Security Act of 1974 (ERISA) and Internal Revenue Code, while also guiding them to take proactive measures related to new regulations.