You want to provide the best you can for your employees. They work hard for you, so you understandably feel an obligation to give back to them. A 401k or 403b plan is a great way to do just that. You provide them with a tax-advantaged way to save for retirement, while also contributing some of your own money.
As great as a 401k or 403b may be, it also comes with some pretty serious complexities. There are a vast number of rules and regulations that cover things like plan investment selections, fees, plan advisors, vesting schedules, contribution levels and more. While these rules are in place to make the plans as strong as possible for participants, they do create a very real administrative need.
The penalties for violating retirement plan regulations can be pretty hefty. The regulations also aren't too difficult to break, especially if you don't have the administrative muscle to spend significant time monitoring the plans. That's why it's always a good idea to work with a trusted professional who has substantial experience monitoring, testing and auditing 401k, 403b and other employee benefit plans.
At Smolin Lupin, we have a team of experienced professionals who are dedicated to keeping our clients' plans in ERISA compliance. Just a handful of the areas where we help our clients with their employee benefit plans include:
As the plan administrator, you have an obligation to keep your plan in compliance with all rules and regulations that are put forth by the Department of Labor. Those rules change frequently. You also have a business to run, so it's probably not feasible for you to stay abreast of every rule change regarding employee benefit plans.
That's where we come in. We stay on top of Department of Labor regulations so you don't have to. We then analyze your plan regularly to make sure that you're in compliance.
We also make sure you're meeting your other fiduciary obligations, which include:
That's just a handful of some of the responsibilities that you need to meet. You also need to responsibly handle any payroll deductions that come out of your employees' paychecks to fund the plan. You should have a written description of that process and how it's handled.
You may hire other advisors to help you with the plan. A common advisor on employee benefit plans is an investment consultant. The investment consultant may help you pick a plan provider, assist in the choosing of investment options and even advise individual participants on their investment selections.
While it may be a great idea to hire an investment consultant, you'll need to document the hiring process to make sure that the decision is made with the participants' interests in mind. That documentation is also helpful in explaining to participants why a certain advisor is hired over others.
A trusted partner who has experience with employee benefits plans can help you vet advisors and document the process. That way, you'll be able to fully justify your selection and provide transparency to your participants on how the selection was made.
In addition to fiduciary rules, you'll also need to meet ERISA's top-heavy requirements. Essentially, the top-heavy rules are in place to make sure that the plan exists to benefit all participants and not just the company's key employees.
Key employees are defined as:
These income guidelines change from year-to-year, so it's important that you stay on top of them if your employee benefit plans are at risk of becoming top-heavy.
The rule states that if a certain percentage of the plan's assets belong to key employees, the plan must also make minimum contributions to the non-key employees. It's not difficult to become a top-heavy plan, especially if there aren't many employees in the plan and a number of employees meet the key employee criteria. This is actually fairly common in small companies and family-owned businesses.
There's nothing necessarily wrong with being top-heavy, but it could be a problem if you are top-heavy and don't realize it. If you don't meet the minimum requirements of top-heavy plans, you could face financial penalties.
As you can see, being a fiduciary is no easy task. If you try to handle this internally, you'll likely need employees dedicated to the task nearly full-time. That's why it's so critical that you work with a partner that understands your responsibilities and makes sure you're in compliance with them.
Our team is experienced and knowledgeable in the operations of ERISA plans. We work with 401k plans, 403b plans and a wide variety of other employee benefit plans. We are a member of the AICPA Employee Benefit Plan Audit Quality Center. That means that our team members are required to take plan management continuing education on a regular basis. We've also regularly received favorable reviews from the Department of Labor and the Public Companies Accounting Oversight Board.
At Smolin, we take ERISA auditing seriously. We don't do it as filler work. We do it to strengthen your plan and your commitment to your employees. Our team is dedicated to helping you meet your obligations and offer a robust and healthy employee benefit plan to your team.