Performing your fiduciary duties—as they relate to your benefit plan—can be challenging to say the least. Depending on your role and how exactly you came to be in charge of certain aspects of the plan, you may not have realized that you were a fiduciary to start with. If there was a formal ceremony to knight you as a fiduciary and present you with a Fiduciary Responsibilities for Dummies book, things might be much easier. Unfortunately, it just doesn’t work that way.

Despite the difficulties that arise in understanding your responsibilities, monitoring the operations of your plan can be made a little easier by being aware of a few simple issues that we typically catch during our audits.

Late Participant Contributions

For plans with more than 100 participants, DOL rules require that an employer remit employee deferrals to the trust as soon as administratively feasible. In no event should this be in excess of the fifteenth (15th) business day of the month following the month in which the participant contributions are received by the employer or withheld from the participants’ wages. While infractions for late remittances appear to be declining, we still see a few of these each year. What you want to keep in mind is that this rule is somewhat open to interpretation. For example, if you mostly send funds to the trust within three days of a payroll run, but occasionally these funds don’t make it to the trust for five or seven days, what then? Did you violate the rule above? Was seven days the fastest that the funds could have made it under the circumstances? Unfortunately, there isn’t really a good way to know.

If a round of deferrals is clearly late, the Voluntary Fiduciary Correction Program (VFCP) process is pretty straightforward, and if it’s corrected in a timely manner, it’s probably not going be a big deal. However, if you choose not to correct, believing that you were within the rules, you should know that the DOL could come to a different conclusion. So, the best policy is to determine how fast you can remit employee deferrals, create internal controls/safeguards around the process, and stick to it—100% of the time, every time. This makes life simple and eliminates the need to correct, or document, why you didn’t correct.

Using the Incorrect Definition of Compensation

Using the wrong definition of compensation is not good at all. If your plan document requires that bonuses should be included in the total compensation figure that’s used to calculate the employer match, for example, and those bonuses are omitted for several years, your company could be on the hook for a large dollar amount in order to properly correct the issue. Our suggestion here is that you fully understand the definition of compensation and take the necessary steps to ensure that your payroll deferral process takes this into account.

Improper Administration of Hardship Withdrawals

Under existing rules (prior to 2019), if a participant took a hardship distribution, they weren’t allowed to contribute to the plan for a subsequent six-month period. Further, your plan may require that the participant take out the maximum amount of loans before a hardship distribution can be made. The six-month rule is changing in 2019 and 2020, but it’s still in your best interest to understand how your recordkeeper handles these types of distributions. Additionally, we recommend that you perform some procedures periodically to verify that transactions are being processed correctly.


With the all of the rules, regulations, and information that’s out there, it’s understandable that things are occasionally overlooked while administering a plan. To avoid the more common mistakes, we recommend fully reading and understanding your plan document, reviewing your summary plan description periodically, obtaining regular fiduciary training (or outsourcing this function), and familiarizing yourself with the IRS 401(k) Plan Fix-It Guide. Do these steps and you’re well on your way to operating your plan in a responsible manner.

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