News

Understanding ERISA and Enforcement 

For retirement plan sponsors, compliance isn’t optional, it’s essential. Every year, thousands of plans are flagged for audit, often due to simple but preventable mistakes. To protect your plan and participants, you need to understand who’s watching and why. 

ERISA (Employee Retirement Income Security Act) establishes the rules governing qualified retirement plans. While governmental plans are exempt and certain provisions don’t apply to owner-only plans, most 401(k) plans fall squarely under ERISA’s jurisdiction. 

Three primary regulatory bodies enforce different aspects of retirement plan compliance: 

• IRS – Focuses on tax implications of following (or not following) the plan document 

• Department of Labor (DOL) – Concerned with participant treatment and fiduciary responsibilities 

• Pension Benefit Guaranty Corporation (PBGC) – Oversees premiums and requirements for defined benefit plans 

Why Plan Compliance Matters 

Risk Management 

Proper compliance helps you avoid costly penalties, fines, and correction procedures. The financial consequences of non-compliance can be substantial, affecting both the company and participants. 

Employee Satisfaction and Culture 

Mishandling participant contributions or failing to follow the plan’s rules can damage employee trust and satisfaction. Compliance issues directly impact morale and overall company culture. 

Three Common Compliance Musts 

1. Deposit Contributions Timely 

Participant contributions and loan repayments must be deposited as soon as they can reasonably be segregated from company assets, often within just a few business days. Late deposits are one of the most common red flags during an audit. 

Tips: 

• Automate contribution processing whenever possible 

• Monitor payroll and deposit timelines regularly 

• Document your procedures for internal accountability 

2. File Form 5500 Accurately and On Time 

Form 5500 is the annual report required for most 401(k) plans. It must be: 

• Completed accurately 

• Filed electronically by the deadline  – July 31 for December year-end plans unless extended 

Remember: 

• There’s no minimum account balance threshold for filing if employees are participating 

• Owner-only plans must file if the plan has $250,000 or more in assets 

• Late or incorrect filings can trigger penalties and increase audit risk 

3. Follow Your Plan Document 

Your plan document is your legal playbook; it defines what’s permissible and required. Any operational changes to eligibility, vesting, matching formulas, and other plan features must be: 

• Properly documented through amendments 

• Consistently followed in practice 

• Understood by those administering the plan 

The Value of Professional Support 

A qualified Retirement Plan Consultant (Sometimes known as a Third-Party Administrator or TPA) provides essential expertise to navigate these compliance requirements. Professional support ensures: 

• Timely contribution processing 

• Accurate and complete Form 5500 filings 

• Plan document updates and operational alignment 

• Proper handling of special situations (rehires, long-term part-time employees) 

• Required testing and corrections 

Conclusion 

Maintaining 401(k) plan compliance requires vigilance, knowledge, and attention to detail. By understanding regulatory requirements, implementing robust processes, and partnering with qualified professionals, you can: 

• Minimize audit risk 

• Protect your organization’s financial interests 

• Strengthen participant trust and retirement readiness 

Compliance isn’t just about avoiding regulatory headaches, it’s about fulfilling your fiduciary duty and doing right by your employees.