TPA to the Rescue. Outsourcing Compliance for your Retirement Administration.
Is your HR department swamped with files, onboarding and performance management…along with fighting fires all day long? Priorities change at a moment’s notice and it’s often difficult to maintain a high level of compliance across the board…ensuring all your boxes are checked and re-checked.
We rely on lawyers, accountants, and other experts to help with the difficultaspects of running a business. There are complexities around managing the company’s retirement plan and assuring it meets the IRS and DOL requirements that usually exceed the HR department’s capabilities. HR should have their own expert to rely upon when it comes to these plans and the risk associated with them.
Here are 3 reasons to partner with a TPA (Third Party Administrator) for your retirement plan:
Considering the risk involved with accuracy and the reporting of your 401(k) and retirement plan administration to the IRS(you need to be 100% correct and timely!) we can’t take chances. It’s important to note that there are experts available to help your HR department navigate the uncertainty and provide the best record keeping and compliance measures to help your organization meet your reporting deadlines and avoid costly fines.
SHRM research indicates from the most recent statistics provided by the DOL, there are in excess of 650,000 defined contribution retirement plans in the U.S., of which 80 percent are 401(k) plans. The DOL’s Employee Benefits Security Administration (EBSA) is charged with assuring that all 401(k) plans are in compliance with the Employee Retirement Income Security Act (ERISA). In approximately three out of four plans audited by EBSA, an ERISA violation was detected relating to the interpretation of he plan document or plan operation. ERISA violations can lead to significant fines against the plan sponsor. Many small and mid-sized companies with 250 or fewer employees offer a 401(k) plan for their employees but often are unaware of the complex requirements and responsibilities for administering the plan. (Kessler, 2014)
Instead of tasking your HR Generalist with this responsibility, outsource it to a Full-Service TPA. Better yet, think of it as a partnership for the long-term.
Don’t risk letting your retirement plan compliance slip to the bottom of the pile. Utilize a TPA that works with employers to handle the company’s retirement plan compliance administration and ensure that record keeping and compliance are managed effectively, from day one.
Avoid the Paperwork
I don’t know about you, but filling out forms and trying to find the data needed to complete the paperwork on time…well, it’s taxing and can cause the best of us to procrastinate the inevitable. Either because we’re unsure of the exact data or metrics to report or we don’t understand the questions asked. It’s always the paperwork that seems to slow us down and can keep us from being fully compliant.
Plan documents, updated adoption agreements, plan amendments (including mandatory ERISA language and updates) and IRS determination letters are important pieces of paperwork that HR departments can outsource the completion and handling of to a trusted TPA.
The right TPA will gather these documents and ensure that all are properly read, completed, filed and administered according to rules and regulations. They are entrusted with the responsibility to make sure the plans are ERISA compliant, so documenting and following a set of processes is the name of the game.
Partnering with a good TPA means you can rest easy…and focus on other HR strategies and functions.
SHRM author Jay Kessler, CPA shares these common mistakes:
Excluding eligible employees from participating. The plan document will define eligibility including age requirements, service requirements (months, hours), employee classification (full-time, part-time, interns, contract labor, etc.) and entry dates.
So, if you’re not fully aware of how employees are classified or unsure of these age requirements, you may find yourself reporting numbers that are inadvertently incorrect…and therefore, not compliant.
Using ineligible compensation to determine participants’ deferrals. The plan document will indicate the sources of compensation (gross compensation, W-2 compensation, bonuses, severance pay, taxable fringe benefits, etc.) to be included or excluded from calculating participant deferrals.
Again, if you’re unsure of how compensation is broken out or not including bonuses, reporting may be inaccurate.
Inadvertently including or excluding employees from employer contributions. The plan document will define the nature of employer contributions (matching, profit sharing, safe-harbor matching, discretionary matching or profit-sharing, etc.) as well as the eligibility requirements and formula for the contribution. Be aware that the eligibility requirements for employer contributions will often differ from those pertaining to employee contributions.
Partnering with a Full-Service TPA is your key to successful retirement plan administration that not only saves your HR department time and headaches…but also saves your organization money in the long run, by mitigating risk through the discovery of errors and the resolution of those errors…so that they don’t result in fines.
*http://www.shrm.org/hrdisciplines/benefits/articles/pages/retirement-plan-compliance-guide.aspx (Kessler, 2014)