Avoiding the Pitfalls of Employee Benefit Plan Administration
By Michael Coletti | February 15, 2015
Complex government regulation and constantly-changing legislation make employee benefit plan administration complicated and time-consuming. Knowing common pitfalls and how to avoid them will help fast-growing companies ease the complexity for plan administrators.
Three common pitfalls to look out for:
Remittance TestingThe Department of Labor (DOL) requires that employers remit employee contributions to the plan as soon as they can be reasonably segregated from the employer's general assets. Generally, the DOL will look to the timing of the remittance of the payroll taxes as a determination of timely remittance relating to the employee contributions. It's recommended that the plan administrator or the committee overseeing the plan have a formal written policy.
Eligible Compensation -The plan administrator and the payroll department should have a solid working knowledge of eligible wages per the plan document. Individuals involved in the process often have not created established means for clearly monitoring and communicating this calculation, which leads to errors in employee and employer contributions. An error in this calculation can be very costly and time consuming to correct.
Employee Changes in Deferrals -The plan administrator should consider the processes for, and controls over, employee changes in their own contributions. When employees increase or decrease their deferral percentage on-line, that change is sometimes not properly transmitted through to payroll. It is common for the plan administrator to rely on the payroll provider and the third party administrator or custodian, but if payroll is not changed timely or properly, the employer is the one who pays the cost to correct the problem.
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