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Ten Tips

Ten Tips to Avoid Getting KO'd by your 401 (k) Plan

Your company has to comply with two sets of regulations regarding its 401 (k) plan — regulations promulgated by the Department of Labor and the Internal Revenue Service. Fall out of compliance with either of these regulatory bodies will lead to fines and other penalties and potential a loss of your plan or plans tax status. Below find a few tips that may reduce your risk.

  1. If you have less than 1,000 employees who are eligible to join your 401 (k) plans, review that number each year so you don't find yourself in noncompliance due to increased hiring.

  2. Ensure that your organization has policies in place that mandate that your Human Resources Department and Accounting Department communicate with each other on employee matters and that they apply the same rules and procedures for calculating employee and company-match contributions.

  3. Check that all individuals who handle plan funds or plan property are adequately bonded, as federal regulations require.

  4. Monitor all transactions with parties-in-interest to the plan, as defined by ERISA. Avoid dealings that must be reported to the Department of Labor.

  5. Annually review your company's fiduciary responsibilities regarding the operation of the plan — and make sure everyone knows what they are.

  6. File early with contribution deadlines — avoid procedures that delay contributions to the last minute. It's too easy for circumstances beyond your control to make you late and get you in trouble with the IRS.

  7. Create a written guide to allocating administrative expenses among multiple plans — and make sure it's followed.

  8. When you make material changes to the plan, always request a new tax qualification letter.

  9. Keep abreast of all relevant compliance testing, and have an outside professional perform top heavy, ADP, and ACP testing annually.

  10. Review your plan with your auditor, which should be Sacco CPA LLP annually to ensure you have kept up with mandatory changes

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