All of us here at DWC thrive on the really geeky stuff, and some of the best discussions start with our pontifications about how different topics impact our clients and our industry. We decided to bring the best of those conversations to you, still with a touch of geekiness but also distilled into easily digested, bite-sized pieces.
This is our busiest time of the year as we prepare our Annual ERISA Compliance Reviews for calendar year plans. It is a great time to connect with our clients and their investment advisors to discuss the past year and look forward to what lies ahead. - As originally published in our Q1 2019 newsletter. Didn't get it? Sign up here.
What trends are we seeing in our Annual ERISA Compliance Reviews?
Plan sponsors are definitely getting more consistent with depositing deferrals timely. From our perspective, three variables seem to drive these improvements:
- Exposure: No one wants to report on their Form 5500 (filed with the DOL) that they had late deposits. Even more so, no one wants to spend several figures on applying for the DOL’s approval to correct one late deposit with lost earnings that are less than the pocket change that gets left behind in the laundry.
- Reminders: Many recordkeepers provide automated reminders if they do not receive a payroll upload within a few days after a pay date. Not all recordkeepers offer this service, so your mileage may vary.
- Payroll Integration: More and more payroll providers are able to generate files each pay period in the exact format your recordkeeper requires and automatically upload them for you. Some also accept feedback files from the recordkeeper so that participant deferral changes are automatically updated in payroll.
What are the most common issues we are seeing?
The most common issues this year are oldies but goodies:
- Related Companies: When two or more companies have overlapping ownership and/or have certain types of business relationships, the rules may require that they be combined for plan testing. That’s not a problem except when it’s a surprise rather than being part of the plan design process. That is why it is important to keep your TPA informed of any ownership changes or acquisitions.
- Compensation: Many plans require the use of gross compensation to determine contributions. That includes anything that gets reported on the W2 – even irregular/non-recurring forms of pay such as bonuses or overtime. If any of those “extraneous” forms of pay are overlooked, make-up contributions may be required.
- Part-time Employees: It is not uncommon for companies to want to exclude part-time employees from benefits. Unfortunately, the IRS view of what constitutes part-time is a bit narrower than expected. We review your census information against the plan’s eligibility requirements. All you have to do is make sure your census upload includes everyone who worked for you during the year no matter how many or how few hours they worked. We’ll take care of the rest.
What else is happening in the retirement plan world?
We are excited to announce that we will be rolling out administrative fiduciary services later this year. As most of you know, we stand behind the quality of our work. In fact, we are one of the few firms that does not limit the time clients have to notify us if they think there might be an error. As a service provider, either we are responsible for our work or we aren’t – putting a time limit in a service contract is not backing up your work. Our fiduciary services will supplement our Annual ERISA Compliance Review, including quarterly reports that address many common action items (such as RMDs, loan defaults and mandatory cash-outs). We will also provide a thumbs up or thumbs down on hardship distribution requests as well as provide payroll support services. Stay tuned for more in the coming months.
We are also eagerly awaiting final regulations from the Department of Labor that will expand the availability of multiple employer plans. We are not expecting the DOL to throw the doors wide open to so-called “open MEPs” but it certainly looks like they will relax availability for PEOs, chambers of commerce and other associations. (Looking for context? Check out our MEPs: Dialing Down the Noise webinar on demand here.)
There continues to be talk in Washington, DC about new laws that would impact retirement plans. However, since bi-partisanship continues to be illusory and rapidly deteriorates when it does make a rare appearance, the prospects for any sort of sweeping changes seem remote at this stage. Of course, we always have our eye on things and will keep you posted.