Keeping the Lines of Communication Open

In our last issue, we discussed the benefits of communicating with plan participants. Now let’s talk about keeping in touch with us.

Whether the concerns are small or large, a discussion with us can save you from making corrections later.

Retirement plans have many deadlines, and Congress often enacts laws that impact how your plan can be operated. For us to be able to keep you dutifully informed and keep your plan in compliance, we need to be notified of any updates to your company address, phone number, or email address. In addition, if you have a change regarding your staff, investment advisor, or accountant, we should be made aware so we can ensure we are speaking about your plan with the appropriate individuals. We take care to keep your confidential data safe and can only discuss private matters with authorized personnel. As such, whenever there is a change in how we can reach you or who we can talk to, it is important to inform us.

There are other reasons to reach out to us, too. Much of the compliance testing we perform compares benefits for highly compensated employees (HCE) to non-highly compensated employees (NHCE). HCEs include owners and family members of the owners, such as a spouse, parents, grandparents and children. Therefore, whenever there is a change in ownership or a family member of an owner joins or leaves the company, notify us as soon as possible. Being aware of these changes will allow us to determine if there are any potential impacts so adjustments can be made to your plan before they become costly.

In addition, when there is an ownership change or a merger or acquisition, the impact to the plan should be considered in advance. Depending on the situation, a plan may need to be terminated before the date of transfer to avoid the compliance risks associated with sponsoring multiple plans. While it’s possible to take advantage of a transition period during this time, it’s better to review all of your options before the transaction so that you can do what’s best for you and your plan participants.

In the event that an owner of your company also owns part or all of another business, a determination will need to be made whether a controlled group exists. In addition, when two or more organizations have a service relationship, they may constitute an affiliated service group. In either of these cases, your retirement plan may need to include the employees of the other business in the discrimination testing. If the plan is found to be discriminatory, contributions may need to be made to the employees of the other business. If it’s possible that a controlled group or affiliated service group could exist, such a determination will need to be made every time there is a change in ownership. Before your current owner purchases shares of another business or a new owner joins your company, let’s see how that will impact the plan.

As businesses change and grow, the plan may need to adapt with the plan sponsor. However, much of the plan’s operations are determined by the plan document. Before any adjustments are made to the administration, processes, or procedures of the plan, we need to be involved. We’ll confirm that the changes won’t impact the plan’s qualified status. We’ll also advise when the changes can be implemented, as some amendments can only be made effective at the beginning of the next plan year. Any changes to the plan document require an amendment to keep the plan in compliance.

Mistakes happen, and—in most cases—the sooner the correction is made, the lower the cost to correct it. Such mistakes can include late deposits, incorrect deposits, or missed deferrals. If you find an error, let us know as soon as possible. In our role as your consultant, we’re here to help you stay in compliance. In return, we ask that you keep us informed of any changes in your situation so we can help to keep your plan qualified and best suited to your goals as plan sponsor.