For employers who offer retirement or health benefit plans, staying compliant with ERISA is not optional. Even minor administrative mistakes can lead to audits, fines, and potential liability. Understanding where problems commonly occur can help you protect both your business and your employees.
Get Employee Contributions Deposited on Time
A frequent issue arises with delays in depositing employee contributions into 401(k) plans. These funds must be transferred as soon as they can reasonably be separated from company assets. Many employers incorrectly assume there is flexibility tied to quarterly deadlines, but that is not the case. Late deposits may be classified as prohibited transactions, which can trigger penalties, corrective actions, and additional reporting requirements. Establishing a consistent payroll process and closely monitoring timelines is essential.
Keep Plan Documents Accurate and Updated
Another common problem is outdated or incomplete documentation. ERISA requires that plan documents and summary plan descriptions accurately reflect how the plan is administered. If changes are made to benefits, eligibility, or contributions, those updates must be formally documented. Failing to keep documents current can create inconsistencies that may surface during an audit. Regular reviews and timely updates are key to maintaining compliance.
Stay Ahead of Nondiscrimination Testing
Retirement plans, including 401(k)s, must pass annual nondiscrimination testing to ensure they do not disproportionately benefit highly compensated employees. If a plan fails testing and corrections are not made in time, employers could face penalties or risk disqualification. Certain health plans are also subject to similar standards. Proactive testing and working with experienced administrators can help avoid these issues.
Do Not Miss Filing Deadlines
Form 5500 filings are another area where employers often encounter trouble. Most ERISA plans must submit this report each year. Missing the deadline can result in significant daily fines that add up quickly. Creating a compliance calendar and assigning clear responsibility for filings can help ensure deadlines are consistently met.
Act Quickly When Errors Occur
Mistakes can happen, but addressing them promptly can make a major difference. The IRS and Department of Labor offer correction programs that allow employers to resolve issues while reducing penalties. Taking swift action demonstrates good faith and helps limit potential consequences.
Partner With the Right Experts
Managing ERISA compliance requires ongoing attention and a proactive approach. Small oversights can lead to costly outcomes if left unaddressed. Working with experienced professionals can help you identify risks, strengthen your processes, and stay on track.
If you want to ensure your benefit plans remain compliant and efficient, work with our benefits specialists. Give us a call if you have questions! We will help you navigate the complexities of ERISA and protect your business from unnecessary penalties.