Retirement plan contributions are a crucial part of any company’s benefit plan operation and managing them effectively can be a complex and overwhelming task. With intricate processes and numerous compliance requirements, errors can easily occur. This guide breaks down common pitfalls, explores how automation can simplify the process, and outlines best practices to ensure compliance and protect your employees’ financial futures.

Top Challenges in Retirement Plan Contributions

The Role of Automation in Reducing Errors

Automating payroll and retirement plan contributions can be transformative. By streamlining processes and reducing the risk of human error, automation helps ensure accuracy and timeliness. Here’s how:

• Automated Enrollment: Captures deferral elections accurately and implements them seamlessly.  Knowing new hires will be automatically enrolled unless they opt out makes deferral elections predictable.
• System Integration: Links payroll and retirement plan systems to process contributions on time and accurately and feeding deferral elections and contributions seamlessly between your vendors. 
• Compliance Checks: Flags potential issues in real-time, catching problems early and preventing costly errors.  If you struggle with your own checks and balances, ask your providers what assistance they can provide to help ensure contributions are submitted timely and accurately.

By leveraging automation, companies can enhance efficiency while reducing compliance risks.

Consequences of Contribution Errors

Errors in retirement plan contributions can lead to significant financial and reputational consequences, including:

• DOL Penalties: For certain violations, penalties may amount to 20% of the transaction in question.
• IRS Penalties: Errors could jeopardize plan qualification status, resulting in costly corrective measures.
• Lost Employee Earnings: Missed or delayed contributions impact employees’ investment growth, potentially affecting their financial security.

Correction Programs: How to Recover from Mistakes

Mistakes happen, but correction programs can help companies address errors and stay compliant:

• IRS Employee Plans Compliance Resolution System (EPCRS): Allows companies to correct errors and avoid plan disqualification.
• DOL’s Voluntary Fiduciary Correction Program (VFCP): Enables companies to self-correct fiduciary breaches, such as late contributions, mitigating penalties and restoring plan integrity.

Compliance Best Practices for Peace of Mind

Adopting these best practices can help your company minimize errors and ensure compliance:

1. Regular Process Reviews: Routinely evaluate payroll and contribution processes to align with compliance standards.
2. Conduct Audits: Perform periodic audits to identify and address errors early.
3. Employee Training: Provide HR and payroll teams with ongoing training on retirement plan processes and current regulations.
4. Implement Controls: Establish internal checks to catch errors at every stage, from deferral elections to contributions.
5. Leverage Third-Party Expertise: Partner with a third-party administrator or advisor for specialized guidance and oversight.

A Roadmap to Compliance and Efficiency

By focusing on best practices, utilizing automation, and using correction programs when necessary, companies can reduce errors, avoid penalties, and ensure employees receive the full benefits of their retirement contributions. With the right approach, managing retirement plans can feel less like a chore and more like a streamlined, efficient process.

Ensure your retirement plan contributions are on track. Connect with a plan specialist to simplify your process and maximize compliance!