As employers try to cope with priorities amid the coronavirus (COVID-19) outbreak, it is important to take care in making sure ongoing retirement plan requirements are not forgotten. This time of year is already filled with several plan tasks: compliance testing, contribution calculations for corporate tax returns, and preparation for the upcoming plan audit for large employers, which are just a few of the plan-based tasks keeping employers busy. The coronavirus is further stretching already stretched payroll and human resources teams at a time when they can least afford it.
Employers have more and more unexpected tasks resulting from the continuing pandemic. It will be increasingly easy to look past various daily tasks and internal controls. With teams potentially all working from home and some employees not working at all due to illness or caring for sick family members, the most basic tasks can slip through the cracks. This is especially true in maintaining the company’s retirement plan where even the most simple mistakes can cause unintended headaches.
Below is a list of issues and tasks employers should not lose track of as they are pulled in many different directions during this difficult time:
- Timely deposits of participant’s 401k withholdings. This continues to be the Department of Labor’s primary enforcement focus. Employers should continue to deposit these amounts consistent with their deposit timing pattern prior to the COVID-19 onset.
- Timely enrollment of participants as they become eligible under the terms of the plan. This is particularly critical in plans with autoenrollment provisions. Failure to do so can result in expensive employer corrective contributions. There may be some administrative flexibility with this process, but employers should proceed with enrolling the eligible participants as soon as possible.
- Adhere to internal control processes over the review of plan data and calculations. Many employers have worked diligently to develop these procedures and now is not the time to be lax in their application.
- As employers begin to pay certain types of special compensation to employees resulting from the pandemic, they should take great care in understanding how this compensation is treated for plan purposes. Failure to do so could result in costly employer corrective contributions.
- Continue to remain diligent in the completion of 2019 plan discrimination testing. The Internal Revenue Service (IRS) indicated that there will be deadline relief related to these requirements. Employers should continue to work with their plan vendors to ensure testing and any related corrections are completed timely.
- If significant numbers of employees are terminated, a partial plan termination may occur. Plans that have a partial plan termination are required to 100% vest participants that terminate during the year. If these rules are not applied correctly, employers may be forced to replenish the plan for improperly forfeited accounts.
- Large employers that require an audited financial statement as part of their Form 5500 filing should continue to work toward the completion of their audit. A lot of the audit work can be done remotely and many accounting firms, including Aronson, will be working on these engagements to avoid a difficult bottleneck later in the year.
This by no means an exhaustive list. However, it is a prime indication of the difficulties associated with operating a retirement plan when proper focus is not maintained.
If you have additional questions are concerns regarding how to properly maintain your retirement plan during these difficult times, please contact Mark Flanagan of Aronson’s Compensation and Benefits Practice at 301.231.6257.