Here’s a very compelling reason to take a closer look at your 401(k) plan:
Seventy-five percent of the 401(k)s audited by the DOL last year resulted in plan sponsors being fined, penalized or forced to make reimbursements for plan errors. And those fines and penalties weren’t cheap.
In fact, the average fine last year was $600,000 per plan. That’s a jump of nearly $150K from four years ago.
On top on that, 88 individuals – from plan officials to corporate officers (such as CEOs and CFOs) to service providers – were criminally indicted for 401(k) offenses, according to the DOL.
1,000 new enforcement workers
On top of that, audits are only likely to increase. This year, the DOL added nearly 1000 new enforcement officers and has every intention of doing more 401(k) compliance audits.
So it’s in employers’ best interest to take a closer look at their plans to make sure they’d pass muster in the event of a DOL audit.
To help, here are some of the more common 401(k) errors the feds find:
Excluding certain compensation. By far, the most common error plan sponsors make is excluding certain types of comp when determining employee deferrals and employer matches for a certain pay period.
The most common comp payments that are improperly excluded are bonus, overtime and vacation pay.
Giving incorrect asset valuation. The total value of the assets in the 401(k) plan must be accurately stated. Having the plan audited by an outside source and getting clear documentation that the plan’s valuation is safe and accurate should help keep you in compliance here.
Making prohibited transactions. The DOL’s always looking for conflict of interest or misuse of plan assets and often finds “prohibited transactions” when it takes a closer look at a company’s 401(k). To make sure your firm doesn’t fall victim to this error, the IRS offers this overview.
This post originally appeared on our sister website, HRBenefitsAlert.com.