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 seventh common mistake is failure to monitor if the elective deferrals are limited to the amounts under IRC §402(g) for the calendar year and if any excess deferrals have been distributed.
- How to Find the Mistake: Inspect deferral amount for the plan participants to ensure that the employee has not exceeded the limits.
- How to Fix the Mistake: Distribute excess deferrals. The correction programs available include SCP, VCP and Audit CAP, depending upon the situation.
This mistake can be avoided in the future by working with plan administrators to ensure that they have sufficient payroll information to verify the deferral limitations of §402(g) were satisfied. For more information please refer to potential mistake number 7 on the IRS 401(k) Fix-It Guide.
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