@401kBasics Plan Sponsor Quick Tips: Mark Important Dates!

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.

Plan sponsors have a fiduciary duty of monitoring plan activity for the benefit of plan participants. This can take shape in many forms, one of which is be aware of and acting prudently to the crucial dates of plan events. Automation is making it easy for plan sponsors to remember such events but it helps a fiduciary reduce liability by knowing when these dates occur. Below are some important dates that should not be ignored:

  • Plan Year End – This is the last day of a plan year and can be found in the adoption agreement form of any 401k plan.  Most plans have December 31t selected but chances are your plan could be off calendar as some plans correlate their fiscal year to the plan year. Not knowing this date is detrimental to the timely submission of your nondiscrimination testing, form 5500 filing, as well as numerous other events.
  • Return of Excess Contributions – Should your plan fail the ADP or ACP test, and need to refund contributions to the Highly Compensated Employees, this needs to be done within 2.5 months after the end of the plan year. (For a calendar year plan, this would fall on March 15th.) Failure to refund these contributions in a timely manner would result in a 10% excise tax to the plan sponsor.
  • Form 5500 Due Date – This form should be filed with the Department of Labor by the last day of the 7th calendar month after the end of the plan year. (9.5 months if a Form 5558 extension has been filed).
  • Notices to participants – A plan sponsor is required to notify plan participants of all plan provisions at certain times of the year. One of those notices pertains to Safe Harbor plans. Eligible employees are required to receive a written notice, no more than 90 days but not less than 30 days prior to the start of the plan year, describing the safe harbor options the employer will use for the plan year. The average employee should easily understand the notice.

A 401k Retirement plan has many dates that a fiduciary needs to be aware of in order to reduce liability. The best place start looking for these dates is through your retirement plan service provider!

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.

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