You can help clients and prospects save time and money by educating them on fiduciary exposure and how it can be reduced. 2. Failure To Follow the Terms of the 401(k) Plan: Another common mistake is failure to base plan operations on the terms of the plan documents. The IRS recommends plan sponsors conduct due diligence annually to ensure the terms of the plan are being followed and communicate with plan participants and plan service providers about changes to the plan on a “timely basis.” 3. Incorrect Application of the Plan’s Definition of Compensation Deferrals and Allocations: Since plans may use different definitions of compensation for different purposes, some plan sponsors may get mixed up when it comes to applying the proper definition when dealing with deferrals and allocations. It can cause real problems because a plan’s compensation definition must satisfy ERISA rules for determining contribution amounts. The IRS urges ensuring proper training for those in charge of determining compensation and annually reviewing compensation definitions. 4. Misapplication of Employer Matching Contributions To Eligible Employees When an Employer Miscalculates an Employee’s Compensation: The IRS urges plan sponsors to contact their plan administrator to ensure they have “adequate and sufficient” records about employment and payroll because, in many cases, the problem is caused by failing to properly count hours of service or identify proper plan entry dates, or an incorrect definition of compensation is being used. 26 WEST VIRGINIA BANKER
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