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Top 5 Employee Benefit Plan Violations

January 22, 2015

Don’t fall victim to an EBSA investigation. Learn how to protect yourself and your company.

Did you know that last year the Department of Labor (DOL) Employee Benefit Security Administration (EBSA) restored over $599 million to Employee Benefit Plans, participants and Beneficiaries through investigations?Below are a few of the most common Employee Benefit Plan Operational Violations we find during plan audits.

Top 5 Plan Violations include:

  1. Untimely Remittance of Participant Contributions- A longstanding initiative of the DOL is to have remittances contributed to the Plan as soon as administratively feasible that comprise amounts withheld from participants' compensation. With the technology available for today’s payroll cycles, this means day(s).
  2. Improper Compensation- A newer and popular initiative of the DOL is to examine the Plan Document definition of what comprises a participants’ compensation and then examine to see if the Plan Sponsor is properly using the Plan Document definition of compensation when calculating requested contributions.
  3. Improper Eligibility- The Plan Document lays out when an employee is eligible to become a participant in the plan and when they are eligible to receive certain benefits. The DOL will examine the Plan Document for these provisions and test that they are being followed.
  4. Improper Vesting- The Plan Document lays out when an employee becomes vested in certain percentages of their benefits. The DOL will examine the Plan Document for these provisions and test that they are being followed.
  5. Improper Participant Notes Receivable Provisions- If a plan offers loans, it is important to adhere to the provisions set forth in the Plan document for issuing loans as well as monitor for consistent loan repayments by the participant. If a participant is not paying back the loan, the DOL will examine if the Plan is complying with the provisions for deemed distributions. All Plan participants should receive equal treatment.

These violations typically occur due to:

  • Lack of understanding of plan provisions
  • Complex plan terms and definitions
  • Dramatic shift in number of individually designed plans to prototype plans
  • Pressure on service providers to control costs
  • Acquisitions and dispositions (personnel & benefits)
  • Turnover at plan sponsors and service providers
  • Failure to consult legal counsel
  • Ineffective internal controls

Lower your chances of violating your company’s plan document by educating yourself and your team about common violations.

To learn more about an EBSA investigation, what to expect and how to prepare, documents that are typically requested, how to avoid common problems and more, contact us.

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