Plan Operation Review

Qualified retirement plans offer an excellent opportunity for employers to contribute towards and also allow employees to save for their retirement on a tax deferred basis. In order for a plan to be qualified, a plan document must first be adopted by the plan sponsor and the plan must be operated in accordance with its provisions.

Some of these provisions include:

  • Eligibility: Minimum requirements employees must satisfy before being permitted to enter the plan as a participant
  • Compensation: The definition of employee pay that will be used for plan purposes
  • Benefits: What types of contributions are permitted within the plan, their allocation requirements and formulas and the schedule in which participants invest in them
  • Rights & Features: In-service withdrawal options while still employed, distribution options after severance of employment, loan parameters and others

Retirement Plan Compliance: IRS & DOL Regulations

In addition, qualified plans must also comply with applicable Internal Revenue Service and Department of Labor regulations, including:

Deposit Timing

Deadlines for the deposit of employee 401(k) contributions and loan payments as well as employer contributions

Participant Communication

Annual or periodic notices, plan summaries, participant statements and the method in which these materials are provided

Non-Discrimination Testing

Annual or as required testing to prove the plan’s benefits, rights and features do not discriminate against non-highly compensated employees


Annual reporting (e.g. Form 5500) and as-required reporting (e.g. reporting excise taxes via a Form 5330)

Failing to operate the plan according to the plan document provisions or in compliance with IRS/DOL regulations can place the plan’s tax qualified status in jeopardy. It can also result in penalties and fees.

Plan sponsors are often on their own to interpret and comply with various plan provisions and regulations while operating the plan on a daily basis. These day-to-day activities can include:

  • Tracking eligibility to ensure new employees are being permitted to enter the plan on time and are receiving the necessary notices and plan summaries.
  • Determining the correct compensation used in applying employee 401(k) deferral elections and calculating contributions (e.g. employer match).
  • Developing and implementing plan-related internal processes (e.g. the timing and method of depositing employee 401(k) contributions and loan repayments).

If you are not confident your plans are fully compliant in their operation or are unsure of your duties as plan sponsors, the Prime Retirement Solutions team can help. We can review your plan documents, annual administration reports and internal processes to identify any potential operational issues. We can then work with you to correct and address them so they no longer pose an issue in the future.