A NON-TECHNICAL REVIEW OF QUALIFIED RETIREMENT PLAN LEGISLATIVE AND ADMINISTRATIVE ISSUES
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OUR RETIREMENT PLAN ADMINISTRATION SERVICES ARE CEFEX-CERTIFIED related to the late deposits ( e . g ., dates and amounts of each late deposit , names of affected participants , record of the specific situation ( s ) that resulted in the late deposits , etc .) is retained with the plan records in the event of an IRS or DOL plan audit .
WHAT HAPPENS IF DEFERRALS WERE NOT DEPOSITED TIMELY ?
When employee deferrals are not deposited timely , there are two available correction methods . The error can be corrected under the IRS ’ self-correction program , which allows plan sponsors to correct certain plan failures without contacting the IRS or paying
a user fee , or by completing a filing through the DOL ’ s Voluntary Fiduciary Correction Program ( VFCP ). It is important to note that the DOL does not recognize self-correction for late deposits . However , in certain circumstances , the DOL may accept selfcorrection if the following steps have been completed .
• Determine which deposits were late and calculate lost investment earnings .
• Deposit any missed elective deferrals , along with lost earnings , into the trust .
• File Form 5330 with the IRS to pay an excise tax .
• Report the late deposits on the Form 5500 .
• Review procedures and correct deficiencies that led to the late deposits .
WHAT CAN BE DONE TO AVOID LATE DEPOSITS IN THE FUTURE ?
Plan sponsors can implement the following internal procedures to ensure that deferrals are deposited consistently .
• Establish a procedure requiring that elective deferrals be deposited with or after each payroll , subject to the terms of the plan document . If deferral deposits are late because of vacations or other disruptions , keep a record of why those deposits were late .
• Coordinate with your payroll provider to determine the earliest date you can reasonably make deferral deposits .
• Implement practices and procedures that you explain to new personnel to ensure that they know when deposits must be made .
As with many retirement plan compliance matters , the rules related to depositing employee deferrals and the related corrections are complex topics . If you have questions regarding the general rules or plan corrections outlined above or would like to discuss how these rules impact your plan , please contact your plan representative . ■
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© Benefit Insights , LLC All rights reserved . This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal , tax or other professional advice . You should not act or rely on any information in this newsletter without first seeking the advice of a qualified tax advisor such as an attorney or CPA .