If you’ve purchased a pre-approved plan from a plan sponsor and have adopted it as your employees’ retirement plan, you are responsible for making sure it complies with all legal requirements. Tips to help you meet this responsibility:
- Adoption agreement. Follow the terms outlined in the agreement. Keep a copy of the plan and refer to it for definitions and provisions that relate to your adoption agreement including: when employees are eligible to participate; types and amounts of contributions allowed by the plan; how employer contributions are allocated; vesting schedule; and distribution options.
- Communication. Make sure you fully understand any communications from your plan administrator and promptly provide requested information and sign any plan amendments sent to you by the plan sponsor. If your sponsor signs amendments on your behalf, send copies of these to your plan administrator.
- Payroll. Notify your payroll processor of any new employees who have enrolled in the plan as well as any required elective deferral suspensions for employees who have taken hardship withdrawals. Your payroll processor should have a copy of your plan and correctly implement any amendments. E.g., make sure your payroll processor: uses the definition of “compensation” specified in your plan for contribution purposes and maximum limitations; deducts the correct amount of employee contributions in a timely manner; deducts the correct amount of any loan repayments.
Periodically review your plan to make sure it’s operating according to the terms and to see if there are features you can add to further benefit your employees. More at irs.gov/retirement.
—Nina Patel, senior editor, REMODELING.