Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.
Over the next few weeks 401kBasics is going to review the common mistakes that plan sponsors make in administering their plan, how to find the mistake and how to correct the mistake. The second common mistake is failing to follow the plan terms in accordance with the plan document.
- How to Find the Mistake: Independent review of the plan and its operation.
- How to Fix the Mistake: Apply reasonable correction method that would place affected participants in the position they would have been in if there were no operational plan defects. Correction programs available include SCP, VCP and Audit CAP, depending on situation.
This mistake can be avoided in the future by developing a communication mechanism to make all the relevant parties aware of changes on a timely and accurate basis. For more information please refer to potential mistake number 2 on the IRS 401(k) Fix-It Guide.
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