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Not Completing Required Plan Audits
Plan Audits are required when a plan reaches 120 eligible employees (for some plans the number is 100). This required audit will take place every year until they are under 80 eligible employees. If anyone has a balance in the account, they are numbered as eligible employees.
The average cost for a required plan audit is $10,000 per year charged to the company and may not be deducted from participant accounts. This amount can be more if your records are not complete or in order or in the format auditors need them. Your company might need to furnish on average 30+ hours of tedious time to prepare for the audit each year.
Having TruNorth on your team can help make the process easier and less expensive.
Investigations by the Department of Labor
The Employee Benefits Security Administration is an agency within the Department of Labor that conducts investigations into companies for violations including ERISA violations such as:
Different from required plan audits, the IRS conducts audits of Employee Retirement Plans. The flowchart to the left shows the process the IRS uses, and potential steps required to correct issues.
It can be a long, drawn-out, and labor intensive process.
Lawsuits by Disgruntled Employees
According to an article in Forbes “401(k) lawsuits are on the rise, with a record number of lawsuits in 2020. Hefty fees, expensive options with low returns, limited investment options, and draconian terms attached to the 401(k) plans all characterized the proposed class-action lawsuits. ” Read the full article here.
The Center for Retirement Research at Boston College states “Employers with 401(k)s are required to administer their plans for the “sole benefit” of workers, a standard that has been the subject of substantial litigation” and identifies 3 main reasons why 401(k) plans are sued: “inappropriate investment options, excessive fees, and self-dealing.” Read the brief here.
Conflicts of Interest
Conflicts of interest arise when an employer or service provider puts their own interests above of the needs and benefits of the plan participants. Some examples include, but not limited to, kickbacks, quid-pro-quos, and using broker proprietary funds.
Taking your sponsor obligations seriously and working with 401(k) plan experts can help you understand and avoid common conflicts of interest.
TruNorth Investment Management has the knowledge and resources to keep up with the ever changing regulations. We can help you keep your plan in compliance and avoid common pitfalls that might get your 401(k) plan in trouble.
A good 401(k) plan attracts top talent, builds high performance teams, and increases employee retention.
Hiring a best-in-class team can help you offer a retirement plan that best meets the needs of your employees and your company and adhere to rigorous ERISA standards.
Having a knowledgeable 401(k) advisor benchmark your plan is one of the easiest and most beneficial actions you can take as the plan sponsor.
"It's much easier to stay out of trouble now than to get out of trouble later."