Some of the biggest 401(k) problems start with something that seemed completely insignificant.<\/p>\n
A new payroll code.<\/p>\n
A change in an employee\u2019s classification.<\/p>\n
A new bonus program.<\/p>\n
A new company.<\/p>\n
A change in ownership.<\/p>\n
A new payroll provider.<\/p>\n
None of these changes may seem like a retirement plan issue when they happen.<\/p>\n
Then a year later, someone discovers that employees were incorrectly excluded from the plan, compensation was calculated incorrectly, deferrals were missed, or contributions were allocated using the wrong numbers.<\/p>\n
Small changes can create large problems because retirement plans touch so many parts of a business.<\/p>\n
Payroll, HR, ownership, compensation, acquisitions, and employment classifications all affect how a plan operates.<\/p>\n
The biggest mistake a plan sponsor can make is assuming that a change is too small to mention.<\/p>\n
A new payroll code might exclude compensation that should have been included. A change from employee to independent contractor status might create an eligibility issue. A new related company might create controlled group or affiliated service group concerns.<\/p>\n
The problem usually is not the change itself.<\/p>\n
The problem is that nobody asked what the change meant for the retirement plan.<\/p>\n
Plan sponsors do not need to become ERISA experts. They just need to develop the habit of asking questions before changes are implemented.<\/p>\n
Call your TPA. Call your adviser. Call your ERISA attorney if necessary.<\/p>\n
Five minutes spent asking whether something affects the plan can save months of correction work later.<\/p>\n
Retirement plan failures are not always caused by dramatic decisions.<\/p>\n
Sometimes they start with a tiny administrative change that nobody thought mattered.<\/p>\n
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