Retirement plans are like human beings – both can use annual checkups.
While people head to the doctor's office for their exams, the health of retirement plans comes by reviewing a list of helpful questions provided by the IRS.
The IRS points out that many mistakes can be corrected easily, without paying a penalty and without even notifying the agency. Its compliance tips are included in fix-it guides, which cover such topics as SARSEPs, SEPs, SIMPLE IRAs, 401(k) and 403(b) plans.
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"Answering 'no' to any of the checklist questions tells you that you may have a mistake in your plan operation," the IRS explained in a statement on its website. "The expanded explanation for each question – the 'Fix-It Guide' – gives you an example of how to correct the mistake."
Each one of the guides also provides a basic review of the rules related to the specific type of plan, an overview of the Employee Plans Compliance Resolution System, frequent errors found in each type of plan and suggestions on how to avoid mistakes.
To further help explain matters, in its series of highlighted questions the IRS raises such issues as:
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Are all eligible employees participating in the plan?
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Are the plan's operations based on the plan document's terms?
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Has your plan document been updated within the past few years to reflect recent changes in the law?
The IRS also noted some common errors that are often found in plans. For instance:
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Employee deferrals and employer contributions were not kept to the proper limits.
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Employees were not given required information.
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The proper employees were not covered.
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Employee deferrals were not deposited in a timely manner.
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Or, the terms of the plan document were not followed.
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