One of the most important duties of a retirement plan sponsor is to ensure that the plan is in compliance with legal requirements – and it’s no easy task, especially for contractors with high employee turnover. The Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) have specific requirements, and U.S. Department of Labor (DOL) audits are on the rise for contractors. 

One way to ensure that you are complying with ERISA and IRC requirements is to review your plan annually and follow administrative best practices.

Keep the Plan Accurate & Current
Ensure that your plan document is up-to-date and aligns with the company’s goals and objectives. There are statutory deadlines for adopting changes to keep your plan within the law. You may be able to use a prototype or a volume submitter document to provide assurance that your plan is compliant. Consider using an independent third-party administrator (TPA) in lieu of your recordkeeper.

Follow Plan Terms
It sounds obvious, but failure to follow plan terms is a top mistake, according to DOL auditors. You are ultimately responsible for keeping the plan compliant. Regularly communicate any plan changes to all service providers, plan fiduciaries, and staff to ensure accurate administration. 

Follow the plan’s definition of compensation for determining contributions – especially if bonuses are paid to employees.

Finally, don’t overlook the plan’s eligibility requirements. Ask your TPA for assistance if you are uncertain on how to apply the eligibility provision.