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A myriad of tasks must be completed each year to keep a 401(k) plan in compliance with ERISA. When considered together, ERISA compliance tasks can seem overwhelming to a 401(k) plan sponsor. When they are unpacked, however, it’s clear they are manageable - especially when you consider many of the more difficult and time consuming tasks may already be handled by a professional Third-Party Administrator (TPA).
ERISA compliance tasks generally fall into one of four categories - nondiscrimination testing, government reporting, participant disclosure, and plan document maintenance. To ensure these tasks are completed timely each year, I recommend the use of a checklist.A checklist for the upcoming 2016 plan year can be found here. The ERISA compliance tasks included in this checklist can be found below. Since not all plans have the same requirements, it’s important that you confirm your plan’s specific requirements with your plan’s TPA. Once you’ve confirmed your 2016 checklist includes all required tasks, you can use it to monitor the completion of these tasks.
Deadlines for the 2016 Plan Year
All 401(k) plans have ERISA compliance tasks that must be completed by a deadline each plan year. Assuming a calendar year-end, some of the most common tasks a plan must complete for 2016 plan year include:
| 4th Quarter 2015 | Deadline |
| Provide any applicable 2016 notices to participants. These include: Safe harbor 401(k) plan notice Qualified Default Investment Alternative (QDIA) notice Automatic enrollment notice |
12/1/15 |
| 1st Quarter 2016 | |
| Provide 4th quarter benefit statements to participants (due 45 days after quarter-end) | 2/13/16 |
| Distribute any 2015 ADP/ACP test failures in order to avoid 10% IRS excise tax (non-safe harbor 401(k) plans only) | 3/15/16 |
| Make 2015 employer contributions to take tax deduction in 2015 fiscal year (assuming no corporate tax extension) | 3/15/16 |
| 2nd Quarter 2016 | |
| Distribute “first year” Required Minimum Distributions (RMDs) to participants that attained age 70 ½ in 2015 | 4/1/16 |
| Distribute 2015 401k deferrals made in excess of the IRC Section 402(g) limit ($18,000 for 2015) | 4/15/16 |
| Provide 1st quarter benefit statements to participants (due 45 days after quarter-end) | 5/15/16 |
| 3rd Quarter 2016 | |
| File 2015 Form 5500 or 2 ½ month extension (Form 5558) | 8/1/16 |
| Provide 2nd quarter benefit statements to participants (due 45 days after quarter-end) | 8/14/16 |
| Make 2015 employer contributions to take tax deduction in 2015 fiscal year (assuming corporate tax extension was filed) | 9/15/16 |
| Distribute Summary of Material Modification (SMM) or new Summary Plan Description (SPD) to participants if SPD modified during 2015 | 9/30/16 |
| Distribute 2015 Summary Annual Report (SAR) to participants (if Form 5500 not extended) | 9/30/16 |
| 4th Quarter 2016 | |
| File Form 5500 (if extension filed by 8/1) | 10/15/16 |
| Provide 3rd quarter benefit statements to participants (due 45 days after quarter-end) | 11/13/16 |
|
Provide any applicable 2017 notices to participants. These include:
|
12/1/16 |
| Distribute 2015 Summary Annual Report (SAR) to participants (if Form 5500 extended) | 12/15/16 |
| Correct any 2015 ADP/ACP test failures with 10% excise tax (non-safe harbor 401(k) plans only) | 12/31/16 |
| Make any 2015 safe harbor or QNEC contributions | 12/31/16 |
| Execute (sign and date) any 2016 discretionary amendments to the plan document | 12/31/16 |
| Distribute “post-first year” Required Minimum Distributions (RMDs) to participants | 12/31/16 |
Ad Hoc Tasks
Certain ERISA compliance tasks do not have a deadline, but may be required during a plan year. These tasks include:
- Ensure your plan’s day-to-day operation complies with the terms of its written plan document. Failure to follow the terms of the plan document is considered an “operational defect” by the IRS. A plan can be disqualified for not fixing an operational defect.
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Distribute the annual participant fee disclosure required under ERISA 404a-5 to any plan-eligible employee as well as terminated employees or beneficiaries with an account balance.
- This notice must be provided every 12 months.
- Provide an amended notice if a plan change will change the information contained in the notice 30-90 days before the effective date of the plan change.
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Give all eligible employees the opportunity to enroll in plan when they have met plan age and service requirements. Employees should receive the following items before they are eligible for plan participation:
- Forms or website instructions necessary to enroll
- Beneficiary designation form
- Summary Plan Description (SPD)
- Applicable participant notice(s) (fee disclosure, safe harbor, automatic enrollment, QDIA)
- Ensure your plan’s definition of compensation is used to calculate plan contributions. If plan specifies a different definition of compensation for a particular contribution type, be sure that different definition is being correctly applied
- If your plan allows participant loans, ensure all loans are repaid according to the terms of the plan’s loan policy and each loan’s promissory note.
- Deposit employee 401(k) deferrals and loan payments timely. Employers must deposit deferrals as soon as they can be segregated from employer assets. Most employers deposit salary deferrals when making payroll tax deposits
- Complete plan “housekeeping” (recommended quarterly), including:
- Cash-out small account balances related to terminated participants
- Process any defaulted loans
- Use any unallocated forfeitures
- Limit 401(k) deferrals to IRC 402(g) limit ($18,000 for 2016). Pre-tax and Roth 401(k) deferrals (if applicable) are combined for purposes of the IRC 402(g) limit
Meeting annual ERISA compliance requirements does not need to be difficult.
The key to easily understanding and meeting ERISA compliance requirements for 401(k) fiduciaries is transparency. When you unpack these requirements, it’s clear they are manageable – especially when you consider most of the heavy lifting is done by a TPA.
Once your 2016 checklist is complete, we recommend you keep a copy with other 2016 plan year documentation. Taking this step can help a 401(k) plan sponsor demonstrate a prudent process in meeting their fiduciary responsibilities.
