3#: Compliance: Not making timely deferrals or meeting filing requirements

Arguably the most important issues for plan administrators to understand are the ways that they can be found non-compliant. Often times, it is the most rudimentary of plan duties that can lead to liabilities and losses if not performed correctly, including:

Properly following eligibility requirements: Plan administrators must ensure participants are notified in a timely manner when they become eligible for enrollment.
Making timely deferrals: Administrators must make timely deferrals based on employee plan elections, salary, and indicated contribution percentages.
Overseeing loans & distributions: It is critical to ensure distributions associated with hardships and loans are made properly and timely according to the plan documents. This also includes making sure loan repayments are set up in a timely manner.
Minding basic requirements: While it may seem tedious, tasks like double checking that you are following the filing requirements of the annual Form 5500 and using the proper definition of compensation as noted in the plan document should be held to high importance.

Related: Who's minding the retirement plan? A 3-pronged approach to protecting plan sponsors

And remember, when it comes to retirement plans, administrators should document everything. This includes retaining minutes from meetings of committees and maintaining an investment file with materials from reviews of investments to protect yourself in any litigation that may arise. Detailed records are an administrator's opportunity to demonstrate how they fulfilled their fiduciary duties to mitigate the risk of the employer's liability.

Instant Insights /

The 3 top 401(k) fiduciary liability mistakes (and how to avoid them)

More From HR Executive

Related Stories

Recommended For You