When is the last time you updated your 401(k) plan document? Many plan sponsors file the document, only intending to update it with changes to investment offerings. But, it’s a good idea to keep the dust off that document – failure to update is one of the most prevalent and serious errors that can disqualify a 401(k) plan. Here are a few things to do and remember that will keep you in compliance:
– Calendar a note to talk with your CPA to stay on top of tax law changes. You need to update your plan document whenever tax laws change that affect 401(k) plans or update every 5-6 years, whichever comes first.
– Review your plan document to be sure that the plan is being operated according to the plan document. Don’t assume that your third-party administrator is following the plan.
– Check for consistency between your summary plan description and the plan document. Pay particular attention to benefits, rights and features to be sure that the language in the summary matches the plan document.
If you find that you’re out of compliance, the IRS will let you self-correct via the Voluntary Correction Program.
Here are two other ways to stay in the clear and make your life easier:
– Keep all of the following documents in one place: original plan document, plan amendments or restatements, adoption agreements, determination letters, IRS opinion letters, any other pertinent records related to the plan.
– Retain original documents when changing relationships and contracts with investment companies or third party administrators.