Winter has finally given way to spring and that means it’s time to clean out your closets, start yard work, and, of course, review your retirement plan. We are at the end of tax season and well in advance of the annual budgeting season, which makes this a great time to review your retirement plan strategy and refresh your understanding of the plan’s provisions. The following five tasks should be addressed prior to your next audit or advisor meeting.
- Determine or reinforce your plan strategy – Many plan sponsors do not have a formal retirement committee, let alone discuss the strategy of the plan on an annual basis. Plan sponsors should revisit their plan’s strategy at least annually and determine whether the goal is strictly for retirement purposes or a retention-and-recruiting strategy to attract potential employees. These discussions lead to short-term and long-term goals that can be discussed with your plan advisor and accounting firm.
- Review external service providers – Meeting your fiduciary responsibility is of utmost importance, and part of that responsibility involves reviewing external service provider fees and determining whether they are fulfilling their duties and responsibilities laid out in the service agreement. Sponsors should also review the number of retirement plans the service provider works with on an annual basis to determine their expertise and competency.
- Review the plan document – Plan administrators should determine whether the most current required amendments have been adopted as well as review the current plan provisions to ensure the plan is in compliance.
- Manage cash out provisions – Most plans have a cash out provision that allows separated employee balances under a certain threshold (e.g. $1,000 or $5,000) to be cashed out of the plan. Monitoring this provision controls the participant count within your plan, which may allow the plan to remain under the audit threshold as well as save on the per participant fees charged by most record keepers.
- Review payroll codes annually – Consider establishing an annual review process to determine whether all payroll wage codes in the system are classified properly as either eligible or ineligible. Eligible compensation is the area in which we see the highest number of exceptions during our audit testing. The self-audit process is a best practice to identify and correct potential audit issues well in advance of the annual audit.
With this year’s crazy weather pattern, spring may not last long and we may just go right from winter to summer. So consider implementing these five items before the summer vacation season begins. We would be happy to discuss these topics or any other retirement plan-specific questions you may have.
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