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Risk Assessment - Administrative & Support, Waste Management & Remediation Industry 401(k) Plan Exam Results

Project Results:

The examinations of over 700 Forms 5500 of 401(k) plans sponsored by the Administrative and Support and Waste Management and Remediation Service industries showed a high degree of noncompliance.

Two key areas are:

  • business code analysis, and
  • noncompliance issues.

Business code analysis

Examination results showed especially high noncompliance with plan sponsors using the business codes representing “Business Service Centers (including Repossession Services and Court Reporting and Stenotype Services)” and “Investigation and Security Services.”

Noncompliance issues

The most common noncompliance errors were:

  • ADP/ACP testing errors,
  • Not timely depositing employee deferrals, and
  • Not allocating contributions according to the plan terms.

Common errors found in the tests included:

  • not properly identifying highly compensated employees,
  • improperly including or excluding employees on the test,
  • using the wrong compensation, and
  • using the wrong contribution amounts.

Contributions must be allocated according to the plan terms. Common examples of this error included:

  • using the wrong compensation, 
  • including or excluding employees, and 
  • not following plan allocation requirements (for example. last day employment or certain hours of service).

Avoid the error

The best way to avoid testing problems is to know the 401(k) plan testing rules including the contribution and compensation amounts to use, how to determine who is a highly or non-highly compensated employee and what year to use in the testing.

Employee elective deferrals must be deposited as soon as you segregate them.

The best way to avoid allocation problems is too make sure the people responsible for determining the allocations know the correct plan provisions and follow them in operation.

Additional resources:
401(k) Fix-It Guide

Page Last Reviewed or Updated: 06-Jun-2016