Compliance Checklist for Your Retirement Plan
To assist you in maintaining your plan’s compliance, the ABA Retirement Funds Program (“the Program”) has prepared this checklist as a tool for your self-audit process, categorized for convenience.*
*This information pertains to plan sponsors who have adopted the Program’s Basic Plan Document. If your plan is on another provider’s master prototype or is individually designed, you may need to refer to your other service provider for assistance.
A written plan document is required to be executed by the plan sponsor. Over time, various legislative, regulatory and/or administrative changes can result in a need for plan amendments or a complete restatement of the plan, which will also need to be executed.
- Keep your plan document up to date.
How the Program helps you: By offering a master prototype (the Basic Plan Document) that will be updated as legally required or upon your request, and providing you with a new adoption agreement for restatements or amendments.
There are documents you are required to provide eligible employees, plan participants and beneficiaries. The following list is not comprehensive, and depending on your plan provisions, not all may be applicable:
- Enrollment Package (always required for eligible employees)
- Summary Plan Description and Summary of Material Modifications (always required)
- Summary Annual Report (always required)
- Disclosure of Plan- and Investment-Related Information for Plan Participants (always required)
- Individual Benefit Statement (required annually)
- Annual Disclosure Document (always required)
- Qualified Default Investment Alternative Notice (only required if your plan’s default investment option is intended to be a QDIA)
- Safe Harbor Notice (only required if your 401(k) plan is intended to comply with the 401(k) safe harbor regulations)
How the Program helps you: By providing you with all of these items to be distributed to the appropriate individuals. The Program sends the Disclosure of Plan- and Investment-Related Information for Plan Participants to participants recorded on our database on your behalf, as well as the Annual Disclosure Document. The Program also sends quarterly and annual individual benefit statements to participants.
If you sponsor a 401(k) plan, you must obtain participant’s salary deferral elections in writing (unless your plan contains an automatic enrollment feature and the participant has been automatically enrolled in the plan). Generally, this takes the form of a Salary Reduction Agreement. Any subsequent deferral election changes should also be obtained in writing. Because this is a payroll function, the Program does not provide administrative forms for this purpose, but you can use the Enrollment Form to establish the participant’s elections when he or she is first enrolled.
If you have employees who have declined to make their own 401(k) contributions, it is important that, at least annually, you continue to offer them the opportunity to do so, in writing.
How the Program helps you: visit www.voyadelivers.com/PAResources for materials you can use to encourage participation, such as posters and email text. The Program’s Enrollment Form can be used for the initial deferral election but for subsequent changes, you may want to establish your own internal procedures.
Tax Forms and Regulatory Filings
Form 5500 is the annual reporting tool for your qualified retirement plan. According to the U.S. Department of Labor’s website (www.dol.gov):
The Form 5500 Series is an important compliance, research, and disclosure tool for the Department of Labor, a disclosure document for plan participants and beneficiaries, and a source of information and data for use by other Federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies.
The Form 5500 Series is part of ERISA’s overall reporting and disclosure framework, which is intended to assure that employee benefit plans are operated and managed in accordance with certain prescribed standards and that participants and beneficiaries, as well as regulators, are provided or have access to sufficient information to protect the rights and benefits of participants and beneficiaries under employee benefit plans.
Filing Form 5500 is an annual requirement that must be completed by the last day of the seventh month following your plan year end. Thus, if your plan year is the calendar year, your filing deadline would be July 31. The deadline can be extended by two and one-half months if you request it specifically by filing Form 5558 with the IRS by mail.
In most cases, your firm will need to file a Form 5500 or a Form 5500EZ for the Plan. However, exceptions are made if total plan assets are under $250,000 at the end of the plan year and your plan is one of the following: • An owner-only plan; • An owner/spouse-only plan; or • A plan only for your firm’s multiple owners or your firm’s multiple owners and their spouses. The caveat is that owners or owners and their spouses must be the only employees eligible to participate in the plan.
If your plan is required to file Form 5500, you must also secure adequate fidelity bonding. A fidelity bond is generally a rider on your firm’s insurance policy, so your insurance provider can assist you in obtaining a bond. The minimum bond amount is $1,000. The bond must be for at least 10% of the plan’s assets, not to exceed $500,000. You should consult with your plan’s attorney to determine the bond amount necessary for your plan.
How the Program helps you: The Program prepares Form 5500 and coordinates the filing for you through a website that allows you to satisfy the electronic filing requirement with the DOL.
**Form 8955-SSA is required to be filed if any plan participants terminated employment in the plan year prior to the plan year for which you are filing, and continue to maintain a balance in the plan. The Program will prepare this Form for you as well if it applies, and upload it with your 5500.
This tax form is used by payors to notify the IRS that a distribution or withdrawal was taken from the plan. It is automatically mailed to applicable participants by January 31 following the year in which the distribution or withdrawal took place. It is also sent to the IRS by February 28 following the year of the distribution or withdrawal.
How the Program helps you: The Program does this automatically. There is no action necessary on your part.
Form 945 is used by payors to report to the IRS any federal income tax withheld from “nonpayroll” payments, or payments from your qualified retirement plan.
How the Program helps you: If participants withdrew funds from the plan, and federal income tax was withheld, it is reported at the Program level on a quarterly basis. This happens automatically; there is no action necessary on your part.
Having your plan documentation and supporting materials in order is just one aspect of sponsoring a retirement plan. You must also operate your plan in accordance with your documentation in order to maintain the plan’s tax-deferred status.
Although this is not an exhaustive list, these are some of the topics you will want to focus on:
Ensure that you are applying the plan’s eligibility provisions in a uniform manner to all employees.
How the Program helps you: Guidelines for determining eligibility can be found in the “Eligibility and Data Changes” section of the online Plan Administrator Guide.
The DOL requires that contributions withheld from an employee’s pay (such as 401(k) elective salary deferrals) and/or loan repayments withheld from pay must be timely remitted to the trustee. Generally, this requires amounts to be remitted as soon as such amounts can reasonably be segregated from the employer’s general assets. It is not permissable to hold the contributions and send them with another payroll at a later date. For example, if your firm has semi-monthly payroll periods, you must remit 401(k) contributions and loan repayments to the Program as soon as the funds are withheld from pay, as opposed to holding them to send once a month with your final payroll.
Failure to adhere to the timely deposit rule can result in excise taxes and civil penalties under ERISA’s and the Internal Revenue Code’s prohibited transaction rules.
How the Program helps you: Our administrative system is designed to issue a reminder letter if 45 days passes without our receipt of 401(k) elective salary deferrals. We also include information throughout our administrator communications regarding the timely deposit rules.
Retirement plan contributions are subject to limits and deadlines. Ensure your employees’ salary deferral contributions and any employer contributions are made by the applicable deadlines and in accordance with that year’s contribution limits.
How the Program helps you: Helpful reminders on contribution deadlines are issued on a quarterly and annual basis, and the Program will calculate your employer contributions upon request, taking into account any other contribution limits and parameters.
While participants’ 401(k) salary deferrals, rollover contributions and all safe harbor contributions are always 100% vested, certain other employer contributions may be subject to vesting based on the vesting schedule you elected for your plan in your adoption agreement. Ensure that you are calculating each participant’s vested percentage in a uniform manner. All participants’ vested percentages are based on that vesting schedule; vesting cannot be accelerated based on other employment agreements or contracts.
How the Program helps you: By tracking your participants’ hire dates, termination dates and any rehire dates current and informing the Program of any changes, the Program is able to provide vested percentages for affected employer contributions. This information is also included on the participant’s quarterly and annual statements.
If your plan has a forfeiture account containing forfeited unvested employer contributions, you will need to take action annually to either reallocate the forfeiture account or use forfeited assets to reduce your employer contribution (depending on the option you elected in your adoption agreement).
How the Program helps you: Each November, we send a reminder letter regarding this requirement to any affected plan sponsor. If you request a contribution calculation, we will factor in any forfeiture account assets in the calculation if you elected the reallocation method. Also refer to the Program’s helpful webinar on this topic located on the Webinars/e-Seminars page of the Program’s website.
Participants are able to borrow from their accounts for any reason if your plan allows for loans, subject to certain limitations. If a participant does take out a loan, he or she should repay the loan via payroll deduction in the frequency expected, to be paid in full by the loan’s maturity date. If no loan payments are received by the end of the applicable cure period or the loan is not repaid by its maturity date, the loan is defaulted and deemed distributed.
If the loan repayment period exceeds five years, you should obtain and retain documentation verifying that the loan proceeds were used to acquire or construct a primary residence.
New loans are not available to participants who have terminated employment with your firm, although any loans in existence at the time of termination from employment can continue to be repaid by submitting payment to the Program.
How the Program helps you: Loan checks are sent to the plan administrator’s attention so that you can establish payroll deductions for the loan repayments. The Program also sends default warning notices to participants whose loan payments have fallen behind for a 180-day period, or those participants whose history of the loan payments that have been made indicates that the loan will not be paid off by the due date. Finally, the Program will deem the loan to be a distribution from the plan if no action is taken by the participant to pay off the loan or bring it current, if it is delinquent.
If your plan allows, participants may request a 401(k) or non-401(k) hardship withdrawal, subject to certain conditions and limitations. As plan administrator, your firm will need to ensure that the participant meets one of the approved reasons for requesting a hardship withdrawal and obtain the necessary documentation to retain on file. For example, if the participant is taking a hardship withdrawal to purchase a primary residence, you should obtain a copy of the purchase and sales agreement and confirm the hardship withdrawal proceeds were used for the purchase. You should also ensure that the amount requested does not exceed the participant’s “immediate and heavy financial need,” provided that the participant lacks other available financial resources.
How the Program helps you: By providing guidance in our online Plan Administrator Guide to assist you in determining whether the hardship withdrawal request conforms to those set forth in the Program’s Basic Plan Document.
Nondiscrimination ADP/ACP Testing. Traditional 401(k) plans are subject to annual nondiscrimination ADP/ACP tests. In most cases, safe harbor plans are not. It is the plan administrator’s responsibility to ensure that the plan has been tested and any corrective action taken if one of the tests fails.
How the Program helps you: After the close of your plan year, the Program will contact you to determine if you want our compliance testing services. If you request the test, the Program will request certain information, such as compensation, and notify you of the test results. If the test fails, we will also provide options for correction.
Top Heavy Testing. Qualified retirement plans are subject to top heavy testing (although certain safe harbor plans may be exempt). It is the plan administrator’s responsibility to ensure that the plan has been tested and any corrective action taken if the plan is deemed top heavy.
How the Program helps you: The Program performs top heavy testing automatically on an annual basis. By keeping your key employee demographics up to date and timely communicating any changes to the Program, you can ensure an accurate test. Should your plan be deemed top heavy, the Program will inform you of the necessary action you need to take. You may also want to refer to the Program’s helpful webinar on this topic, located on the Webinars/e-Seminars page of the Program’s website.
In general, all retired participants are required to start payments prior to April 1 following the calendar year in which they turn age 70½ . A participant who is age 70½ or older and still employed is not subject to the required minimum distribution, provided the participant is not a 5% (or more) owner of the firm (a “5% owner”) at any time during the year in which he or she attained age 70½. A participant who is a 5% owner and who is age 70½ or older and still employed is subject to the required minimum distribution.
How the Program helps you: Please refer to the “Required Minimum Distribution” section of the online Guide, linked here.
FIDUCIARY RESPONSIBILITIES Many of the actions needed to operate a 401(k) plan involve fiduciary decisions. This fact is true whether you hire someone to manage the plan for you or do some or all of the plan management yourself. Controlling the assets of the plan or using discretion in administering and managing the plan makes you and the entity you hire plan fiduciaries to the extent of that discretion or control. Hiring someone to perform fiduciary functions is itself a fiduciary act. Thus, fiduciary status is based on the functions performed for the plan, not a title.
Some decisions with respect to a plan are business decisions, rather than fiduciary decisions. For instance, the decisions to establish a plan, to include certain features in a plan, to make certain amendments to a plan, and to terminate a plan are business decisions. When making these decisions, you are acting on behalf of your business, not the plan, and therefore, you would not be a fiduciary. However, when you take steps to implement these decisions, you (or those you hire) are acting on behalf of the plan and thus, in making decisions, may be acting as fiduciaries.
Those persons or entities that are fiduciaries are in a position of trust with respect to the participants and beneficiaries in the plan. The fiduciary’s responsibilities include:
- Acting solely in the interest of the participants and their beneficiaries;
- Acting for the exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan;
- Carrying out duties with the care, skill, prudence, and diligence of a prudent person familiar with such matters;
- Following the plan documents; and Diversifying plan investments.***
How the Program helps you: Through a unique design, the Program provides employers with the most comprehensive protection from fiduciary liability under ERISA. Other providers of retirement plan platforms may claim that their platforms are the best at limiting liability under ERISA because the providers of these platforms make available fiduciaries under Section 3(21) of ERISA or investment managers as defined in Section 3(38) of ERISA. Because of the way the Program is structured, these additional fiduciaries are not necessary to protect employers from fiduciary liability under ERISA. For more information, see the Program’s fiduciary flyer, found here.
***Source: U.S. Department of Labor, “401(k) Plans for Small Businesses,” http://www.dol.gov/ebsa/publications/401kplans.html.
While there are other considerations in ensuring compliance for your plan, we hope you have found this summary helpful in your ongoing administration. Please don’t hesitate to call our Plan Administrator Line at 800.752.6313 or email us at firstname.lastname@example.org with any questions.