Retirement Plan Administration
What Is A Retirement Plan?
A retirement plan is a savings program that helps individuals accumulate and manage money for retirement, often with tax advantages. Retirement plans can be offered by employers (like a 401(k) plan) or set up individually (like an IRA).
Essentially, a retirement plan is designed to provide income and financial security to individuals during their retirement years. These plans are typically established and funded during an individual's working years to ensure they have enough savings to support themselves once they stop working.
Key Elements To Employer-Sponsored Retirement Plans
Employer-sponsored retirement plans have several key elements that define eligibility, how they work, how contributions are made, investment options, vesting schedules, and how benefits are managed, including compliance requirements. Below is an overview of plan basics and requirements:
- The type of plan
- Eligibility rules (who can participate)
- Employee communication and education, including a required Summary Plan Description (SPD)
- How employee contributions are handled
- How employers make contributions, if any
- How funds are invested
- How the plan is managed
- The vesting schedule
- Distributions, withdrawals, and access to funds (Loans, Required Minimum Distributions, etc.)
- Fiduciary responsibilities
- Compliance Testing
- Recordkeeping
Common Errors Of Retirement Plan Administration
Below is a list of the most common errors in retirement plan administration, all of which can lead to penalties and corrective actions.
- Incorrect employee eligibility
- Missed or late contributions
- Contribution limit violations
- Vesting errors
- Investment allocation mistakes
- Failure to conduct required testing
- Incomplete or late reporting
- Poor recordkeeping
Bottom line, organizations have to comply with the legal requirements where administration is fraught with errors. But don't worry, we have training courses to help! We offer compliance training courses for a number of retirement plan options, plus provide a “Best Practices Checklist For Retirement Plan Administration†at the bottom of this page.
Suggested Workers' Comp Training Courses
The Payroll Training Center offers compliance training courses for administering 401(k), Defined Benefit, and other retirement plan options. Simply click the applicable link below for details on each course.
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Retirement Plan Administration: Best Practices Checklist
Payroll Integration- Ensure payroll deductions are set up correctly for:
- Pre-tax contributions
- Roth contributions
- Catch-up contributions (if eligible)
- Verify that employer matching or profit-sharing contributions are correctly calculated and posted
Employee Eligibility & Enrollment- Confirm employees meet age and service requirements
- Automatically enroll eligible employees according to plan rules
- Maintain accurate records of hire dates and entry dates
Contribution Limits & Compliance- Monitor employee and employer contributions against IRS limits
- Track total annual contributions to avoid excess contributions
- Conduct nondiscrimination tests (ADP/ACP) on schedule
Vesting Management- Apply the correct vesting schedule for employer contributions
- Update vesting if plan rules or employee status change
Investment Allocation- Confirm contributions are directed to allowable plan investment options
- Provide participants with regular investment statements and options education
Reporting & Documentation- Maintain accurate payroll and contribution records
- File Form 5500 and other required reports on time
- Keep records of all notices and communications to participants
Distribution & Withdrawal Compliance- Follow plan rules for early withdrawals, loans, and hardship distributions
- Verify tax withholding is applied correctly
- Ensure Required Minimum Distributions (RMDs) are processed when due
Regular Audits & Reconciliation- Reconcile payroll data with plan records monthly or quarterly
- Conduct internal audits to catch errors before external audits
- Correct discrepancies immediately
Employee Education & Communication- Provide clear enrollment materials and plan summaries
- Offer periodic training on contribution options, investment choices, and plan benefits
Stay Updated on Law & Plan Changes- Keep current with IRS, DOL, and state regulations
- Adjust payroll systems promptly when contribution limits or plan rules change
