Things that “aren’t your problem” before the introduction of your 401(k) very much become your problem once you have a plan to administer–especially when reviewed in light of irregularities or questions about your plan.
It’s a matter of when, not if. Either it will be you auditing your own plan, an outside organization doing it on your behalf, or—with luck, rarely—the IRS.
But your responsibilities begin long before an audit and continue for the life of the plan. Those responsibilities can take forms that you might not expect.
A common example: Uncommunicative employees.
All decisions about an employee’s 401(k) must be in writing
Any time your policies require employees to make a decision about their 401(k), such as whether to participate in auto-escalation, you must have written evidence of the choice they made.
In today’s world, that communication can be written or digital. Whatever form it takes, you must be able to retain it for years.
Consistency in documentation is the key. That means adopting a policy that spells out the form policy communication must take place in, and accepting only that form. For example:
- Printed or e-signed PDF form
- Online submission via your recordkeeper
Businesses big and small can have issues with prompt plan communication. It happens especially often in situations when employees must proactively state whether they want to participate in 401(k) withholding.
Often, business leaders feel a temptation to throw up their hands when employees don’t make their desires clear.
It’s well and good you’ve been working hard to get an answer—but if it comes down to your word against the employee’s, you’re at a disadvantage. You may end up making their plan whole out of the company’s money.
To reduce ambiguity, strengthen your policies
To avoid confusion, use these two approaches:
- Be proactive about 401(k)-related communication
- Have clear, unambiguous policies for all situations
Be sure your policies outline exactly what happens in various situations—so no one can argue they weren’t informed.
Contact Cassell Plan Audits for more information today.
