Spencer Posted August 18, 2011 Posted August 18, 2011 We are auditing a 401k plan. Plan document says Match is 100% up on first 5% for the month, and 50% up to 7% for the month. Notwithstanding preceeding sentence, a participant shall not be entitled to Match with respect to a month unless he is an Eligible Employee on the last day of the month. Just to clarify this not discretionary. For 2010, Match was calculated on annual basis. This benefits some participants and others were shorted. And some participants received match even though they were not eligible on the last day of the month. We advised client and TPA of error and recommended they revise calculation to comply with plan doc. They said "eh, we don't think it's big deal". So obviously, failure to comply with written terms of the plan document. This is an operational defect, right? And they are risking disqualification? For 2011, Match is being calculated on per payroll basis. argh!
QNPG Posted August 18, 2011 Posted August 18, 2011 We are auditing a 401k plan. Plan document says Match is 100% up on first 5% for the month, and 50% up to 7% for the month. Notwithstanding preceeding sentence, a participant shall not be entitled to Match with respect to a month unless he is an Eligible Employee on the last day of the month. Just to clarify this not discretionary. For 2010, Match was calculated on annual basis. This benefits some participants and others were shorted. And some participants received match even though they were not eligible on the last day of the month. We advised client and TPA of error and recommended they revise calculation to comply with plan doc. They said "eh, we don't think it's big deal". So obviously, failure to comply with written terms of the plan document. This is an operational defect, right? And they are risking disqualification? For 2011, Match is being calculated on per payroll basis. argh! Does the plan document state that the period to determine compensation to be used is annually or monthly? "Great thoughts reduced to practice become great acts." William Hazlitt CPC, QPA, QKA, ERPA, APA
K2retire Posted August 19, 2011 Posted August 19, 2011 Sounds like it might be easier to amend the document than to change the client's practices.
david rigby Posted August 19, 2011 Posted August 19, 2011 Sounds like it might be easier to amend the document than to change the client's practices. Whose error? sponsor or TPA? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Spencer Posted August 23, 2011 Author Posted August 23, 2011 Does the plan document state that the period to determine compensation to be used is annually or monthly? Monthly. Whose error? sponsor or TPA? TPA error. Sponsor is looking for guidance.
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