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Retirement Plan Enrollment Best Practices

January 1st is possibly the biggest enrollment period for retirement plans. 

After communicating to an employee that they are eligible for the plan, it’s important to be sure each employee completes the necessary forms. An enrollment form should be provided to each eligible employee so they have the opportunity to sign up for the retirement plan. Your company should have procedures in place for maintaining good enrollment records. These are especially important in case of an audit. 

Important Retirement Plan Enrollment Record Considerations

Every employee should have a form or record on file of their retirement plan enrollment. Even if an employee declines to participate, you must keep records that you offered the enrollment and that they elected to opt out. Obtain a signed deferral election form for every newly eligible employee; this will offer verification that the enrollment was offered. 

If your retirement plan offers online enrollment, be sure you save copies of electronic notifications. Follow-up with employees who have not submitted their election. Retain good notes by saving copies of emails or memos sent to employees as further documentation of this communication. 

If your retirement plan incorporates an automatic enrollment feature, it’s imperative to have strong processes in place to determine who needs to be enrolled in a timely fashion and who will be responsible for doing so. Automatic enrollment requires an advanced and annual notice which must be provided. You should document when these notices were distributed. 

Retirement Plan Investment Options

You should also double-check the employee has completed investment options. Even if they elect not to defer, if the company offers an employer contribution, investments will need to be selected. If your retirement plan has a Qualified Default Investment Alternative (QDIA) in place, be sure you have distributed the necessary notice that describes the QDIA and what happens when an employee does not make investment selections.

Retirement Plan Deferral Election Changes

Finally, check your retirement plan document or written administrative procedures to determine how often changes can be made to deferral elections. Many plans allow changes on a payroll-to-payroll basis, but if your plan has stricter rules, such as monthly, quarterly, or semi-annually change allowances, you will need to know at what times during the year employees can make changes. It is important to note employees can elect to defer 0% at any time.  

Making sure you have an enrollment election on file for every eligible retirement plan participant will eliminate any questions in the future in case of an audit or simply if the employee has questions later.  Failure to offer enrollment to eligible participants or begin an employee’s deferral election is an operational error and may result in costly corrective procedures. It’s equally important to annually verify retirement plan beneficiary information; read more about the importance of maintaining retirement beneficiary forms by clicking here.

Watkins Ross partners with our clients by providing a dedicated team of retirement plan professionals to help navigate the complexities, rules, and regulations of retirement plan administration. Whether you’re seeking to improve your retirement plan enrollment process or simply have questions about the rules and regulations that pertain to your unique situation, Watkins Ross can help you meet your corporate objectives and reduce costly penalties. Connect with our experienced retirement plan team here for more information.

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