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 eleventh common mistake is failure to check if minimum contributions were made to top heavy plans.
- How to Find the Mistake: Review the rules and definitions for top-heavy found in your plan document. Make a determination whether your plan is top-heavy for each plan year.
- How to Fix the Mistake: EPCRS. Properly contribute and allocate the required top-heavy minimum, adjusted for earnings, to the affected non-key employees.
The correction programs available include SCP, VCP and Audit CAP, depending upon the situation.
This mistake can be avoided in the future by performing a top-heavy test each year. For more information please refer to potential mistake number 11 on the IRS 401(k) Fix-It Guide.
This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.