Avoid These Mistakes in 401K Plan That Can Result In 401k Audit
You are a successful business owner. Your goal is to provide the absolute best environment for your clients and your employees. When you have employees who are happy and proud to be representing your company, they will reflect this positivity to the clients your business is aiming towards. It is a win-win situation. A great way to obtain satisfied employees is to give them benefits that will impress them. A significant benefit is a 401k plan. The professionals at Joyce CPA, LLC, are experienced in a 401k audit. Because of this, we are happy to share the possible mistakes in 401k plans that you must avoid. You can trust us, Cutler Bay.
Mistakes In 401k Plan That Can Result In a 401k Audit
Benefit professionals must take the time now to sit down with a professional like Joyce CPA, LLC, and create a plan that includes an internal audit to ensure that their policies are in compliance. Here is a list of mistakes that should be avoided:
- Missteps with the Plans Eligibility Requirements
- This can be caused by employees enrolling too early or too late. Sometimes the individuals simply forget altogether. This can happen when employees are working at another corporate affiliate or division.
- Misinterpretation of the Vesting Period
- Every plan defines when an employee reaches one year of service. Human Resources and other departs may calculate it differently based on a specific algorithm.
- Break-in-service Rule Violations
- Typically a plan will state when an employee leaves a company and if they get rehired within a certain time frame. When this happens, they are automatically eligible to participate ina 401(k) plan. This rule often gets overlooked.
- Errors in Calculating Employee Contributions
- The contributions should be determined in accordance with the plan documents. This should include the definition of compensation. It is also in accordance with the employee’s instructions.
- Profit-sharing Contribution Miscalculations
- Many errors occur when annual calculations are performed manually instead of automatically tallied with payroll software.
- Mismanagement of Employee Requests
- If employees requests are handled manually, they are sometimes coded incorrectly or not entered in the first place. An example is for changes in deferral percentages that are never taken into account after being requested.
- Inconsistent or Late Payment of Employee Deferrals
- Contributions must be paid as soon as administratively feasible. It cannot be late that the 15th business day of the next month. This is the time when referrals are withheld. Employee contributions should be done by this time. Also, they need to he consistently remitted among all payrolls and pay periods.
- Increasing Forfeiture Accounts
- When an employee leaves and forfeits their 401(k) balances, the funds are not always used as outlined in the plan. For instance, paying employer-plan fees or in the time frame required by the IRS.
Call Us Today To Know If You Have Any Of The Above Mistakes In Your 401k Plan
We know all about how to make a successful 401k plan. Here at Joyce CPA. LLC, we are your resource to keep you following all the rules and keep your business running! We are conveniently located in Cutler Bay, FL. Call or contact us today for more information. We are a certified internal auditor company specializing in a 401k audit.