Every employer should be aware of all emerging department of labor issues for the sole purpose of ensuring that their benefit plans are properly administered. When offering benefits to employees, small businesses have generally been at a disadvantage in comparison to large corporations.
Here are some of the most common 401K compliance mistakes that small business owners commit.
Not Reviewing Plans Regularly
Small businesses that offer 401K plans are lawfully required to provide a formal document that clearly states all the terms of compliance. However, a good number of business owners think that these plans are a one-time-only document. They often forget that the plan has to be updated according to new requirements such as tax laws. Ideally, a good plan should be updated every five to six years and be reviewed in between cycles.
Failure to Keep Correct Track of Employee Contributions
Tracking contributions are one of the biggest challenges for small business owners. In order to avoid making such mistakes, it is important to implement all the right strategies for determining contributions. It would be advisable to work with a reputable firm that will allow you to remain compliant. The company will simplify the process and make it easy for you to keep track of all your employee contributions.
Excluding Eligible Employees from the Plan
Many small businesses overlook some employees when it comes to determining who is eligible for a 401k plan. Part-time workers or employees who choose to make elective deferrals may be considered ineligible for the 401k compliance plan.
Not Keeping Up with Laws and Regulatory Agencies that Govern Your Business
Over the past few decades, there have been many 401k compliance laws and agencies that have emerged. Many small businesses fail to recognize these laws or even keep up with them. They include employee privacy laws, overtime pay laws, and payday laws among others. They play a very significant role in 401k compliance for small businesses.
Also, the department of labor has introduced many changes that make it harder for small businesses to be compliant. If you don’t have extensive knowledge of tax law, it would be wise to work with a counsel firm that will show you the proper steps to take to be compliant, such as Carnegie. If you want to learn more about their services, you can visit https://www.carnegieinvest.com/our-services/retirement-plan-services/.
Overlooking Break In Service Rates
Labor laws state that when employees leave their jobs or are re-hired within a specific time period, they are all eligible for a 401K plan. However, many small business owners choose to overlook this and do not let their employees receive their rightful benefits.
Even though small businesses are merely getting a grip of 401K compliance plans these mistakes should always be avoided. It is also important for them to analyze their providers and only go for the best 401K support choice. This way, they will always be steered in the right direction. The easiest way for small businesses to avoid making a mistake is by understanding the law and keeping up with any changes. Remember that all 401k loans should be supported by a written document that complies with all Internal Revenue Code (IRC) revisions.