When the Internal Revenue Service (IRS) launched a series of “LESE [Learn, Educate, Self-correct and Enforce] examinations” last year, one of its intentions was to discover trends in compliance failure among qualified retirement plans.
Here are the most frequently cited compliance errors. By avoiding these mistakes, compliance experts say sponsors can go a long way toward navigating—or avoiding—IRS audits. Full article over at Plan Sponsor.
1. Failing to amend plan design to comply with current law in a timely fashion
2. Failing to procure adequate fidelity bonding
3. Not following plan terms for loan and distribution processing.
4. Neglecting to allocate contributions and forfeitures in keeping with the plan terms.
5. Failure to properly run nondiscrimination tests.
6. Failure to deposit elective deferrals into the trust in a timely manner.
7. Using an incorrect definition of compensation per the plan terms
8. Failing to monitor plan contributions to ensure they do not exceed dollar limits or the deductible limit for employers.
9. Distributions of excess deferrals are incomplete, not timely or improperly calculated.
10. Not filing the final Form 5500.
Pro Tip: The IRS chose plans with invalid business codes on their 5500’s – if you can’t get your own business code right, what are the chances you are running your 401(k) plan properly!