401K Plans and Reducing Operational Mistakes

by | Apr 29, 2013 | Guest Spotlights, PKF Texas - The Entrepreneur's Playbook®

Greg: This is PKF Texas, the Entrepreneur’s Playbook. I’m Greg Price, director of Consulting Solutions, and I’m here with Sonia Freeman, a director and our audit practice leader at PKF Texas. Sonia, welcome to the playbook.

Sonia: Thank you, Greg.

Greg: So, Sonia, there’s been a lotta discussion around employee benefit plans, 401Ks, and the potential for operational mistakes. Most people don’t know what that is. Can you explain what an operational mistake is?

Sonia: Absolutely. We see lots of operational mistakes, but an operational mistake is when a company has a plan document and they’re not following their plan document.

Greg: So are there common mistakes that companies make?

Sonia: Yes, we see a number of common mistakes. A lot of these will probably register with you, timely remittances of participant deferrals, incorrect use of the definition of “compensation,” in the plan document versus what we normally think of as compensation. Those can be different, so you have to be careful in that. Incorrect calculation of employer matches, and, also, incorrect calculations of vestings. That is just a very short list of many common mistakes that we see.

Greg: Wow, that sounds like you can get into some trouble in a short period of time. If I experience some of these, am I doomed?

Sonia: It depends. If a company ignores these problems, then, yes, you can have some very stiff penalties and fines that are associated to the company who sponsors the plan.

Greg: So how would one either oversee or police these benefit plans?

Sonia: Well, you have both the IRS and the Department of Labor, the DOL, who both have responsibilities of oversight and enforcement of that. And one of the things that is really kind of interesting is that we might think that they are really trying to make it difficult for companies, but it really isn’t the case. They really are looking to make sure that companies are in compliance with their plan documents.

Greg: Wow. This sounds like an area where we’re gonna have to have to you back to talk some more about it in the future. Will you join us on that?

Sonia: I’d be happy to. Thank you.

Greg: Great. We’ll have you back on the playbook. This has been another Thought Leader production brought to you by PKF Texas, the Entrepreneur’s Playbook. Tune in next week for another chapter. And if you’d like to get more information about employee benefit plans, go to PKFTexas.com/BenefitPlanAudits.

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