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Housekeeping For Retirement Plans

As with nearly everything else, retirement plans require periodic maintenance to keep running smoothly. Here are some suggestions to ensure your plan complies with all laws and regulations and meets the goals of your benefits program.

Keep your plan up-to-date with the law. On a regular basis, ask your benefits professional “when and what” to change in your plan. Those who specialize in retirement programs may provide auditing and plan review services.

Avoid the following common mistakes:

  • not following the terms of the plan document

  • not covering the proper employees

  • not giving employees required information

  • not depositing employee deferrals or employer
    contributions in a timely manner, and

  • not limiting employee deferrals and employer
    contributions to the proper limits.

  • Periodically review your plan. Errors in a plan brought on by changes in your workforce and its salary deferral patterns are easier and cheaper to fix when they are small and have not been allowed to continue over a long period of time. If you have a SIMPLE IRA, SEP or similar plan, consider a check-up now. Tools include checklists for operating these plans — see IRS Publications 4284, 4285 and 4286 at

  • Get an independent reviewer to check your plan. An independent reviewer may see something that others have overlooked. This could save you and your employees money, and may improve benefits.

  • Monitor the people who work with your plan. Make sure that those who operate your plan are getting the correct data. Monitor the plan investments. Make sure any fees are appropriate. Make sure plan contributions and distributions are occurring properly and in a timely manner.

  • Report to the government. Pension and welfare benefit plans must generally file the Form 5500, Annual Return/Report of Employee Benefit Plan, every year to report their financial condition, investments and operations. Plans must generally file the return on the last day of the seventh month after their plan year ends. (If that due date falls on a Saturday, Sunday or federal holiday, then it may be filed on the next business day.) Plans that must file a Form 5500 or Form 5500 EZ include (but are not limited to) profit-sharing plans, stock bonus plans, money purchase plans, 401(k) plans, annuity arrangements under Code section 403(b)(1), custodial accounts established under Code section 403(b)(7) for regulated investment company stock, and individual retirement accounts (IRAs) established by an employer under Code section 408(c).

  • Correct mistakes now. The Internal Revenue Service’s Self Correction Program (SCP) gives plan sponsors financial incentives for finding and correcting mistakes earlier rather than later. In fact, many mistakes can be corrected easily, without penalty and without notifying the IRS; the plan and its participants keep tax benefits.

    You can also ask for IRS assurance about correcting mistakes through the VCP (Voluntary Compliance Program), which works for errors not eligible for self-correction. Errors are corrected and the tax benefits of the plan are preserved for plan participants and the plan sponsor with IRS help. Errors corrected under SCP or VCP are not treated as errors if the IRS audits your plan.

  • Ask employees for their opinions. Benefits should enhance recruitment, retention and job satisfaction. If the plan isn’t working for your employees, it’s not working for your organization. To get input, you can conduct regular, formal surveys along with making a point of asking individual employees what they think whenever they make a plan change or ask a question about their benefits.

    The most effective surveys are brief, simply worded and seek specific information. When designing your survey, ask for the information that will be most valuable to you. For example, you could ask employees if their plan offers enough, too many or too few investment options. Or ask non-participants why they opted not to participate, and what would make them consider participating.

  • Keep your communications up to date. In addition to providing current information on fund options, deferral limits, etc., consider the tone of your publications as well. Do they reflect current realities? Some plan materials promote a 401(k) or other defined contribution plan as a supplement to a defined benefit plan. However, for most employees, a defined contribution plan is the only employer-
    sponsored option they have. Even for those who make maximum deferrals, the typical 401(k) will likely not be enough to fund a comfortable retirement.

  • Keep informed on the latest retirement plan news. Free and reliable sources of retirement benefit news and information include Retirement News for Employers, a periodic newsletter from IRS Employee Plans; the 401(k) Help Center (; and

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