Your Employee Benefit Plan might need a year-end checkup. Take note of six areas you should be reviewing and perhaps taking action to update before year end.

6 essential questions to ask of your Plan

1. Have we followed the involuntary cash out provision of our Plan document? There are voluntary and involuntary cash outs of participants’ account balances. An involuntary cash out does not require a participant’s consent and typically a Plan document has a provision that allows for involuntary cash outs to separated participants whose account balance is below a certain threshold (say $5,000). If your Plan has many former employees with balances remaining in the Plan, utilizing the involuntary cash out provision may allow the Plan to avoid being subject to an audit. No audit is required if your Plan has under 120 participants as of the first day of the Plan’s year.
2. Have we allowed employees to enter the Plan in accordance with Plan document provisions? The Plan document will provide the definition of eligibility and when an employee should be allowed to enter the Plan once satisfying the eligibility requirement. For example, an employee may be eligible to enter the Plan on the first day of the quarter, provided he/she has completed a year of service and attained age 21. It is important to review all recently hired employees’ start dates to make sure no newly eligible participants have been missed. In addition, there may be a provision that states that the employee must have worked 1,000 hours in order to satisfy the “year of service” requirement. There may be cases where some long-time employees who have not worked more than 1,000 hours in a prior year have now satisfied this provision and should be entered into the Plan. Don’t forget about them!
3. Have matches been made correctly and has the correct definition of compensation been used? Review the Plan document’s definition of eligible compensation and be sure it is being followed. Also, make sure that your matches have been made correctly and there are no excess or deficient “matches” for any of your employees. The employee contribution limit for 401(k)s is $18,000 for 2015 and 2016. If an employee will reach age 50 by the end of the year, an extra $6,000 is allowed. Keep in mind Plan provisions may require that the employer match be paid on all eligible compensation and not just on the compensation deferred upon. Some employees may contribute up to the maximum employee limit earlier in the year and a true-up employer match may be required at year-end for the remainder of their compensation not deferred upon.
4. Have we updated plan documents as needed and filed the required forms? The Employee Retirement Income Security Act (ERISA) can often be difficult to comply with, so periodic updating of your Plan documents is necessary. The designated Plan Administrator must have written documents available for examination upon request. These are:
   • Latest updated Summary Plan Description (SPD)- This is the main source to communicate plan rights and obligations to participants and beneficiaries. Refer to the IRS website for more information on what the SPD should include- You might have to do some updating before year-end.
   • Annual Report Form 5500- This is a form that must be completed by Plan Sponsors for any plans subject to ERISA. For a calendar year plan, the due date for Form 5500 is July 31st (the last day of the 7th month after the plan year ends). Read more about Form 5500 in our blog: “Form 5500 Deadline Looming: Do You Know Which Version to File?”
5. Have we had an independent investment review? The fiduciaries of the Plan are responsible for ensuring that the investment options offered by the Plan are not underperforming and that the fees being charged are reasonable. Plan Sponsors are encouraged to engage independent investment advisors to do a review and benchmarking of the Plan’s investment offerings and fee analysis. Any analysis performed should be formally documented and retained.
6. Are all of our board minutes documented? It is crucial that all your board minutes are on record so that there is documentation that all actions surrounding the Plan have been approved by the Board.

A year end checkup is indispensable to running a successful retirement plan- Be sure to refresh your plan as needed for 2016.

Questions? Contact any member of our Employee Benefit Plan Audit Team.