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W W W. M A I N E B I Z . B I Z 23 A U G U S T 2 4 , 2 0 1 5 H OW TO B Y M A T T P R U N I E R T here's no denying that 401(k) retirement plans are a popu- lar and valued benefi t for employ- ees. From an employer's perspective, they're great, too: properly run and managed 401(k) plans don't require a signifi cant investment of time or money, making them a win-win. However, there is a catch. Retirement plans are regulated by both the U.S. Department of Labor and the Internal Revenue Service, meaning a laundry list of rules and regulations. Running afoul of these rules has serious consequences, including monetary fi nes, penalties, or even loss of the plan's qualifi ed tax status. As a fi rm, we audit close to 200 plans each year and have seen it all. Following are the most common errors we have run into. Not following the plan document e plan document is the legal instru- ment that dictates how your plan should be run. It is the fi rst and last word on how your plan should be operating on a daily basis. As auditors we often run into situations where the plan is being operated (almost always unintentionally) in a manner which is inconsistent with how the plan document is written. e answer we often hear is, " at is the way we have always done it." Failure to follow the defi nition of eligible compensation Somewhere in your document there is a section that describes which wages will be considered compen- sation for purposes of calculating employee deferrals and employer match amounts. Many plans simply defi ne compensation as W-2 wages. is seems simple, but in practice the application of these rules can be much more diffi cult. What happens to the group term life which is imputed income on a pay stub, or to the $50 gift card you gave your employees around the holidays? What to do: Read your plan document to under- stand the defi nition of compensation then verify that this is and how every- thing is actually working. Fiduciary responsibilities — who me? Almost all the employers we work with look to outside service provid- ers to manage their plans. Investment advisors help select and monitor funds, third party administrators track participant accounts and handle many of the everyday transactions of the plan like loans and distributions and custodians hold the assets for the plan. But who is in charge of moni- toring the various service providers? Legally, the plan sponsor and the plan administrator hold fi duciary respon- sibilities for the plans they administer. When something goes wrong, the Department of Labor and the IRS will be looking to the company for answers. What to do: Set up a plan committee responsible for approving plan amendments, reviewing plan fees and expenses, monitoring the perfor- mance of plan investments and gener- ally monitoring the operations of the plan. Ensure they meet regularly and maintain detailed minutes. Untimely remittance to the plan e general rule of the Department of Labor states that employee deferrals must be remitted to the plan as of the earliest date on which these contribu- tions can reasonably be segregated from the employer's general assets but in no event later than the 15 th business day fol- lowing the end of the month in which amounts are contributed by employees and withheld from their wages. e DOL has increased scrutiny of the timeliness of remittance of employee contributions and is enforcing the "earli- est date" requirement of the regulations. is has gone so far as instances where we have seen contributions remitted four days after a particular pay date for 25 pay periods during a year and then on the 26 th period the funds were remitted on Day 1 and the DOL calls all of the four-day remit- tances late since the plan has dem- onstrated the ability to remit funds before that timeframe. What to do: Be diligent and consider having a backup is is by no means an exhaustive list of potential pitfalls. Working together with your advisors and providers can help ensure your plan stays out of trouble with the regulators. M a T T P r U n i e r , a s e n i o r manager in the employee benefi ts practice at Baker Newman Noyes in Portland, can be reached at m P r U n i e r @ b n n C P a . C o m Avoid common 401(k) plan errors MDF 37th Annual Meeting 2015 Friday, September 25th ° 9 a.m. - 1 p.m. Cross Insurance Center, Bangor To register, visit mdf.org ° For more information, 207-622-6345 Special thanks to our MDF Champion Circle Members: Amtrak Downeaster, Bangor Savings Bank, Cianbro, FairPoint Communications, Hannaford, IDEXX Laboratories, L.L. 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