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Paul Watson

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Plan administration for your company’s 401(k) can be a complicated task, but as a plan sponsor, making mistakes, even inadvertent ones, can be extremely costly.  Additional payments, taxes and fines are common, while in extreme cases of mismanagement, plans can be disqualified altogether.  Below are some of the more common mistakes that sponsors make.

Missed Deferrals

This one is common enough that the IRS has information on its web site about how to correct it, but correcting this can be expensive, especially if these errors have been accumulating. For instance, if an employee’s deferral has been mistakenly paid as taxable income, the employer would need to make a corrective contribution of 50% of the missed deferral, adjusted for earnings.  This error, and others, can be fixed through the IRS’s Employee Plans Compliance Resolution System (EPCRS).

Failure to Transfer Deferrals in a Timely Manner

The Department of Labor requires that deposits be made “as soon as administratively feasible.”  This time can change depending on the plan and the size of the company, but if an audit determines that a sponsor has not been making deposits in a timely manner, penalties can range from voluntary correction to fines and back payments on missed earnings.

Not Tracking Loan and Hardship Repayments

Not all plans allow for loans or hardship withdrawals.  For those that do, what is allowed can vary considerably between plans. Some plans, for instance, allow multiple loans, while others will allow hardship withdrawals but not loans.  It is important that plan sponsors understand the conditions under which hardship withdrawals can happen and for loans, ensure that repayments are happening in a timely manner.

Failure to Understand and Apply the Plan’s Definition of Compensation.

Contributions are calculated on the plan’s definition of compensation.  Some plans include bonuses, while others do not; same with overtime pay.  If there are forms of compensation that aren’t addressed in the plan, sponsors should make the necessary changes to include those.  Failure to follow the plan’s definition can lead to companies underpaying deferrals, which can result in penalties if not quickly corrected.

Poor Documentation

From sponsors not documenting changes properly to failing to send out required notifications, documentation problems are quite common.  They can also be expensive.  The Department of Labor can levy big fines on companies that fail to send out things like summary plan descriptions, eligibility alerts or other required notices.

Avoiding Issues

Mistakes are going to be made from time to time.  The most important take-away is to fully understand the plan being offered, be aware of potential problems, and be in a position to quickly correct any issues that arise.

View Disclosures

Due to the global pandemic that we are going through many employees from various industries have been working from home. This has brought about a different way of thinking about working from home both on the part of the employee and many of the companies involved. Both employees and employers are seeing many benefits in this business model and some plan to continue this after health crisis has been resolved. It saves money for both the employer as well as the employee with, in most cases, a good or better work product being created.

Work habits

But, for the employee, some work habits need to be corrected. Currently many might be working from a laptop using a bed as a desk. But doing this for longer than a few months can cause problems with the back as well as many other joints. This is not the way any person should be working all day often for 8 or more hours and can cause real problems for the human body.

Changes to make

If this is going to be a continued way for employees to work, then they need to redesign how they need to be working from home. This can be done in either one of two ways:

  • Better placement of laptop and other equipment;
  • Designing a small office area.

Laptop cart

This first solution is to look for a Laptop Cart that can be used in almost any space. They have the following benefits:

  • Better on neck, back and other pains from becoming a problem;
  • Flexibility in where they can be located;
  • Can be moved as needed;
  • Plenty of storage.

A little research on the internet can find reviews of what is currently on the market, with prices and advantages easy to find.

Computer desks

Another solution is a White Computer Desk having these advantages:

  • Making a better office-like environment;
  • Can be set up permanently in a quiet and less distractive part of the home;
  • Can make for better and more stable office-like hours away from family.

Research on this will find many reviews on an assortment of styles suiting the employee’s taste and environment.