The first step for enrolling new participants in your retirement plan is to determine their eligibility and entry date. Per your retirement plan document, determine the age and service requirements to enter the retirement plan. Once employees have met all retirement plan entry requirements, they will join the retirement plan on the next retirement plan entry date per your retirement plan document.
It is possible that a rehired former retirement plan participant re-joins the retirement plan immediately upon the rehire date. Your retirement plan document will outline the rehire procedures. We recommend you contact your Watkins Ross administrator for assistance when you have a rehired employee.
The Retirement Plan Sponsor is responsible for monitoring eligibility and notifying employees. During the Retirement Plan Year, you should continually update your list of employees to determine if anyone has met the requirements to become a participant. Once an employee becomes eligible to participate, you should:
- Inform the employee that they are now eligible to participate in the retirement plan
- Have the employee complete a Beneficiary Form and an Enrollment Form
- Distribute Required Participant Notices (including fee disclosures)
- Give the employee a copy of the Summary Plan Description (SPD) within 90 days of the date they become a Participant
You must keep copies of the beneficiary and enrollment forms in your records. You should also ensure you maintain accurate address and contact information for each participant. It is recommended to do this at least annually.
Failure to implement elective deferrals or allow an eligible employee to participate may result in corrective contributions to be made by the employer. Fortunately, the Internal Revenue Service (IRS) has provided relief for these errors via the Employee Plans Compliance Resolution System (“EPCRS”). The EPCRS is a system of IRS-approved corrections that allow sponsors of retirement plans to resolve various types of failures and still continue to maintain the plan’s tax-favored status.
Usually, the failure may be corrected by making a contribution equal to 25% of the missed deferral (plus any missed matching contributions and earnings). However, if the error is caught within the first 3 months, this corrective contribution is not necessary. You must provide a notice to the affected participants within 45 days of the date on which the proper deferrals started occurring and provide the enrollment materials immediately. Once you notice something has gone wrong, please notify Watkins Ross immediately. The sooner we can catch and correct an error, the lower the correction cost will be.
Looking to enroll new participants in your retirement plan? Connect with Watkins Ross today to receive a personalized look into your retirement plan enrollment requirements. Our experienced retirement plan administrators are available to help guide you through the proper documents, notifications, and deferral timelines you need to avoid IRS penalties.