4 Things You Should Be Checking
With so many complex and ever-changing rules, nonprofits that provide a 403(b) plan for employees should regularly review their retirement plan compliance responsibilities, including these key areas:
1. Employee contributions — These must be remitted by the earliest date that is reasonably possible to segregate the contributions from the employer’s general assets, but no later than the 15th business day of the following month. Compliance issues arise when plan administrators mistakenly treat the “15th business day” rule as a safe harbor and, in reality, contributions can reasonably be segregated in a shorter time period.
2. Compensation — Eligible compensation should be thoroughly defined and cover the entire range of compensation — from W-2 wages and overtime to bonuses and fringe benefits. Problems can occur when a third-party administrator or payroll processor is not up to speed on the plan’s definition of compensation, or when the plan’s definition of compensation is amended but the third-party administrator or payroll processor is not notified.
3. Eligibility — Plan sponsors are ultimately responsible for maintaining an accurate list of eligible participants. Be sure to document that employees have been notified of their eligibility to begin participating in the plan, as well as those who elect not to participate.
4. Fees — Plan sponsors must also determine the reasonableness of all fees paid to outside service providers (like a third-party administrator or investment advisor). This entails benchmarking or otherwise comparing those fees against industry norms.
Remember that the ultimate responsibility for the plan’s operation rests with the plan sponsor, not the outside service providers you may hire to maintain your benefit plans. The IRS cuts nonprofits no slack for noncompliance — even unintentional errors.
For more information on this topic or to learn how Baker Tilly specialists can help, contact our team.