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Retirement Plan Procedures, Practices, and Internal Controls

With the New Year right around the corner, now is a good time to review your retirement plan’s policies, procedures, and internal controls. Having strong internal controls and documenting procedures is important to safeguarding retirement plan compliance and ensuring you are operating your retirement plan properly. Documentation standards and internal practices also allow retirement plan sponsors to readily detect and prevent costly errors, consequently reducing risk and liability.

Below are some general year-end retirement plan review guidelines:

Topic

Employee Eligibility & Communication

Considerations
  • What is the process for determining when an employee is eligible for retirement plan benefits?
  • Who is responsible for maintaining personnel records for retirement plan participants?
  • How are employees notified they are eligible for the retirement plan?
  • Who is responsible for distributing retirement plan notices to the employees and how are notices distributed?
Topic

Contributions

Considerations
  • How does an employee elect to make retirement plan contributions or make a change?
  • Who communicates retirement plan employee elections to payroll?
  • How are employee contributions remitted and deposited?
  • Who verifies the correct definition of compensation is being used when calculating retirement plan contributions?
  • Are contributions and deposit amounts verified and how often?
  • How are employer contributions determined and who ensures the correct contribution is made?
Topic

Retirement Plan Distributions

Considerations
  • How are retirement plan distributions requested, reviewed, and approved?
  • Who determines if an employee is eligible for a distribution?
  • How is vesting verified?
  • Who is responsible for completing and filing Form 1099-R?
Topic

Retirement Plan Design & Administration

Considerations
  • Is your retirement plan document updated regularly and timely?
  • Who determines Highly-Compensated Employees and Key Employees?
  • How is Controlled Group or Affiliated Service Group status determined?
  • Who completes the annual retirement plan testing?
  • Who is responsible for completing and filing annual forms?

One last item to consider is the process of handling documentation and information distribution when retirement plan administrative employees retire, are terminated, or change jobs internally. Retirement plan records and information should be organized, saved, and easily identified for new employees taking over retirement plan administration responsibilities.

The IRS states it is the plan sponsor’s responsibility to properly administer retirement plans; the IRS provides an excellent checklist for retirement plan sponsors on their website.

If you’re seeking assistance with your year-end retirement plan administration review process or procedure development, look no further than the experienced actuaries at Watkins Ross. Our retirement plan team will review your plan documents to determine any gaps in procedure, compliance, or risk so you can start the new year confidently error-free. Learn more about Wakins Ross retirement plan services by visiting our website or reaching out to our team here for more information.

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