Beyond the Numbers: Operational Errors
Two Partners at Weaver’s Assurance Service Department, Kerri Franz, and Aracely Rios, joined Beyond the Numbers to talk about the top five operational errors that occur and how to reduce them.
Untimely remittances of employee contributions can occur if the plan sponsor does not transmit those contributions or loan payments to the trust in a timely fashion. Franz advised that clients should make sure these contributions are deposited in the same amount of time, a day or two, as payroll taxes get deposited.
“A plan sponsor, and the manager of the plan, should be familiar with the definition of compensation according to their plan documents or adoption agreement, and make sure they’re following that to the T,” Rios said. “They’ll want to know, are bonuses allowed, is overtime allowed, is it all W2 wages; what compensation can the participant defer on.”
Improper match allocations are another operational error to keep on one’s radar. “Some common errors we note is the wrong compensation can also be used for the matching contributions the same way as the deferrals,” Franz said. “You have to make sure you’re looking at the correct definition when you’re applying your match allocation for participants.”
Rios added the IRS places plan match limitations. “I do run into issues where there is only a handful of people at a company that will reach those compensation limitations. It’s overlooked, and those people are being matched too much. The compensation limitations change from year-to-year, and the IRS will let you know what those limitations are.” Administrators should have a plan for those who might max out, and their matches would need to be limited.