A retirement plan is one of the most valuable employee benefits you can offer. By giving your people peace of mind about the future, you’ll inspire them to new heights. But a retirement plan introduces potential for costly mistakes—and that might keep YOU up at night.
When a business introduces retirement benefits, senior stakeholders often do a lot of research to find the plan with the lowest costs and greatest benefits. It is wise to compare providers and save on administrative fees and overhead.
But those aren’t the only costs involved. Plan management oversights can be expensive. That often comes down to one key consideration: You must know your policy on the treatment of bonuses vis-a-vis retirement plans inside and out.
No matter the structure of your retirement plan, there’s one ironclad rule: you must withhold appropriate contributions from all compensation provided to your covered employees in accordance with the plan document.
When it comes to bonuses, there’s a confusing caveat. Some plans allow bonuses to be omitted, others don’t. And if you’re planning not to withhold from bonuses, you need to either have it spelled out in your plan documents and communicated to employees or, in cases where it is up to the employee, obtain hard evidence that the affected employee knows about the option, understands it, and affirmatively opts in or out.
The question of bonuses is even more pressing today.
Over the last two years, many employees have received special perks such as COVID “hazard pay.” This often takes the form of separate checks outside the regular compensation cycle.
When clarity on bonus policy is lacking, required withholding often gets overlooked. This leaves your business thousands or even millions short on withholding and subject to cumbersome correction processes and financial obligation towards the plan participants.
It’s crucial to understand the withholding options your retirement plan provides for and apply them consistently. Every stakeholder should have easy access to written policy guidance.
If you’ve had any withholding oversights, it’s best to uncover them now—before the government does. Taking action means you can correct the issue. A professional retirement plan audit gets you there fast.
Contact Cassell Plan Audits at 630.886.7669 to learn more or schedule your virtual appointment.