During the event, “EPCRS: Correction of 401(k) Plan Mistakes,” co-presenter Avaneesh Bhagat, manager, Voluntary Compliance
Group in the IRS’s El Monte, California, office, discussed common 401(k) plan failures.
“Plan sponsors need to take a holistic view of these corrections,” he said.
“They need to find the errors, fix them and avoid them going forward.”
One common mistake, he said, is the failure to do a timely
update of plan documents. “Legislation can make for constant change to your
plan documents and plan sponsors sometimes miss the deadlines for making such
Other failures may occur because the plan does not operate
in accordance with plan terms such as compensation, matching contributions, ADP/ACP
testing, eligible employees, the 402(g) limit, top heavy contributions, hardship
distributions or loans.
To prevent errors from happening, Bhagat recommended plan sponsors regularly review plan records such as the original plan document,
amendments, adoption agreements, IRS opinion or advisory letters, IRS
determination letters, minutes or resolutions from the board of directors, and
the summary plan description.
“Plan sponsors need to figure out where the gaps
are and then amend these documents to reflect compliance with current legislation,”