Communication and Following Your Plan Document
Ultimately, increased communication to employees regarding the importance of plan participation can help a plan avoid failing the discrimination tests, without having to make changes to matching formulas in the plan.
Recently, the IRS found errors occurring with approximately 10% of a sample of more than 5,000 forms submitted by plans making corrective distributions after failing discrimination testing. The mistakes identified offer a useful checklist of compliance requirements that might require extra attention for plans failing the discrimination tests. Errors calculating the required distribution amount were common.
Additional errors noted by the IRS included allowing employees to participate earlier than provided in the plan, and not timely enrolling employees after they had met the plan’s eligibility requirements. It is important to follow the terms of the plan document and to communicate clearly with employees about the benefits of participating in the plan. It can be the difference between passing and failing the tests.
This article is a follow-up to the article published last week.
Join Our Newsletter
Sign up to receive exclusive newsletters with the latest information affecting you and your organization.
SHARE THIS POST