When it comes to your retirement plan, keeping your participants engaged is a must.
Not only is providing participants with enrollment opportunities in a timely manner critical to keeping your plan in compliance, it is also an important step in their retirement success story. Although the matter of when to provide enrollment materials to a participant will depend on the plan’s eligibility and entry requirements, continuing the conversation over time is also a component that cannot be overlooked.
- If your plan allows new employees to participate on their first day of employment, the plan enrollment paperwork can be included in the new hire materials. Care should be taken so the plan paperwork doesn’t get lost among the rest of the onboarding information. If you use an online checklist to go through the various types of new hire forms, a link to the plan enrollment should be provided as well.
- If your plan has monthly or quarterly enrollment, provide the enrollment material and Summary Plan Description (SPD) with enough time for the employee to review the information and make an informed decision. In most cases, the SPD must be distributed within 90 days of the employee becoming a participant. However, giving it to them before entry can help them better understand the plan.
- If one of the plan’s entry dates corresponds to your company’s annual benefit enrollment, include the plan information with the rest of the benefits material. Although some of those employees may already be enrolled, this is a great time to remind staff of what’s available with the retirement plan, which may lead to them increasing their contributions.
Once the initial enrollment period is completed, communication should continue with employees regardless of whether or not they chose to participate by contributing to the plan. A decision made in the past may not represent where an individual is now. Reminders as time goes on will benefit all plan participants.
- Employees who opted out of participation in the past may now be ready to start saving for retirement.
- Participants who stopped deferring based on their financial situation may be persuaded to start again.
- As plan compensation increases, participants may be encouraged to increase their plan contributions.
- Participants might increase their contributions if they realize they are not deferring at a high enough percentage to take full advantage of a matching employer contribution.
There are natural times to communicate with your participants about plan participation. Those times include when communicating updated limits, sending annual notices, and completing performance reviews.
- The Internal Revenue Service (IRS) updates retirement plan limits every year on January 1. When you inform your staff of the updated annual limits, be sure to include instructions for beginning and increasing contributions.
- Most plans are required to provide annual participant notices, along with the Summary Annual Report (SAR). Any time that you share plan communications with the participants is a great time to re-emphasize the benefits of the plan. Encouraging them to meet with the plan’s investment advisor will provide a great resource for questions about investing in the plan. The more that they are encouraged on an ongoing basis to understand the accumulated benefit of contributions to the plan—rather than just at the start of being eligible—the better prepared they will be.
- Performance reviews can also include a review of retirement readiness. If the participant is not contributing to the plan, that one-on-one conversation can go a long way towards helping the employee and their financial health. Additionally, consider the needs of both remote and in-office staff to ensure they all receive the necessary information and the opportunity to ask questions.
The more often you communicate with your staff about the retirement plan, the more successful your plan can be. The more successful your plan is, the more your participants will be prepared for retirement.
Lost but Not Forgotten
On December 27, 2024, the Department of Labor (DOL) launched the Retirement Savings Lost and Found Database of terminated participants who still have a benefit in a qualified retirement plan and are at least age 65. While the database is now active and available for use, it is in the early stages of development and is still being worked on to become the comprehensive source that it’s intended to be.
Participants may leave employers without realizing that they have vested benefits in a retirement plan or may choose to leave the money in the plan but forget about the balance as they change jobs or move. The plan is required to report terminated participants who possess a balance on Form 8955-SSA. In the past, the burden was on the Social Security Administration to notify the former participant about the possible benefits once the participant reached the Social Security normal retirement age. The DOL Lost and Found Database is intended to assist participants who have lost track of prior account balances to reunite with plans from their past.
For more information about the database, visit lostandfound.dol.gov.
Which Bond is Best?
Retirement plans can be covered by three types of bonds: fidelity bonds, fiduciary bonds and cyber bonds. As a plan sponsor, you will be asked for the fidelity bond coverage amount during the year-end data collection process because the amount is reported on the plan’s Form 5500 each year. Although only the fidelity bond is required for most plans, the fiduciary and cyber bonds offer additional protection for the plan—and therefore, the participants. Let’s review each option to help ensure you have the coverage you need.
As mentioned, the fidelity bond is required for most plans due to the Employee Retirement Income Security Act (ERISA). The fidelity bond, or ERISA bond, must cover at least 10% of the beginning-of-year plan assets. There is a $1,000 minimum bond amount and a $500,000 maximum. If the plan holds employer stock or securities, the maximum required value increases to $1,000,000. Some assets may also require additional coverage. When the asset balance is $0 during the first year of the plan, the bond is still required and should be purchased based on the estimated asset balance for that year. Some policies offer an inflation clause or an automatic escalation to increase in value as the plan’s assets increase, which can help simplify maintaining the required coverage amount.
While the fidelity bond protects the plan’s participants from losses due to fraud or theft, the fiduciary bond protects against losses caused by breaches of fiduciary responsibility. A fiduciary is anyone who exercises discretionary control or authority over a plan’s management, administration or assets. Even a trusted fiduciary that acts in good faith may inadvertently violate the laws outlined under ERISA. The fiduciary bond is not required but may be desirable to protect both your company and the fiduciary in these situations.
The cyber bond is also available to protect the plan from financial losses caused by cyberattacks or data breaches. Cybersecurity is a major concern for all institutions, and retirement plans are no different. For those who are apprehensive about the threat of cyberattacks, the cyber bond can be a valuable option.
To ensure peace of mind for you and your participants, the cyber bond and fiduciary bond can be worthwhile companions to the required fidelity bond. If you have questions about what is necessary for your plan, we can talk about the available options to find the best fit.
Upcoming Compliance Deadlines for Calendar-Year Plans
© 2025 Benefit Insights, LLC. All Rights Reserved.
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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Spring will arrive soon, promising new growth and a fresh beginning. It could also be the perfect time to do some spring cleaning for your plan. Let’s look at some areas that you might consider reviewing to ensure your retirement plan is operating efficiently.
Document your processes and procedures to make certain that plan tasks can be handled in case of any absences during an enrollment or pay period. Having a backup in place can prevent errors and delays that could lead to penalties.
Make sure to have a process in place to notify all new enrollments of their eligibility, regardless of whether the plan has automatic enrollment. Depending on the timing for plan entry, including the plan enrollment paperwork with the new hire paperwork could make entry easier for you. Please reach out with any questions regarding when an employee enters the plan.
Deposits of employee deferrals and loan repayments must be submitted to the plan as soon as possible to avoid penalties and corrections. For plans with less than 100 participants, a safe harbor rule allows deposits to be made within seven business days. For larger plans, the expectation is that the money will be deposited more quickly. Depositing these funds on the pay date will avoid the possibility of being late.
Monitoring deferral contribution limits during the calendar year will avoid refunds after year end. Make sure that your payroll is set up to stop deferrals once the limit is reached, including any catch-up contributions for those who have reached age 50.
To keep the plan in compliance, employer contributions must be deposited timely. Due dates are impacted by the type of contributions, required status and tax deductibility. If you have questions on when to deposit your employer contribution or even whether to make an employer contribution, please contact us.
Most plans must be covered by a fidelity bond. The minimum coverage is 10% of plan assets (rounded up to the next $1,000) and the maximum coverage is $500,000. Additional requirements apply to plans with employer securities or non-publicly traded assets. If your fidelity bond is insufficient, now is the time to raise the coverage. Inflation clauses that increase the bond amount as the plan assets increase can ensure that your bond coverage is always adequate. Contact us or your insurance provider if you don’t have a fidelity bond.
Another area to review is communication with participants. Helping your employees understand and trust the plan can increase their contributions. Be sure that your procedures include distributing any plan-related communications—including required participant notices.
Distributions also involve communication, including some of the aforementioned notices. Discussing distribution options with terminated participants, possibly as part of an exit interview, can help to reduce risk of lost participants. We’ll provide instruction on distributions for force-out distributions for small balances, testing corrections and required minimum distributions.
Your plan document is the legal source on how the plan should be administered; operating within its parameters is critical. It’s always worth taking time to review the plan document to ensure that you fully understand and are following its provisions. We’ll cover more details about the plan document later in this newsletter. We’re here to support you in keeping your plan in compliance. Please feel free to reach out with any questions.
Addressing the Challenge of Uncashed Distribution Checks
Uncashed distribution checks present a persistent and often overlooked challenge for retirement plan sponsors. Despite the best efforts of plan administrators, some participants fail to cash their distribution checks, leading to administrative burdens, fiduciary concerns and potential compliance issues. A recent publication by Retirement Management Services (RMS) sheds light on this issue and offers practical guidance for employers seeking to manage and mitigate the risks associated with uncashed checks.
Uncashed checks can arise for various reasons. Participants may have moved without updating their contact information, may not recognize the check as legitimate or may simply forget to deposit it. Regardless of the cause, the responsibility for addressing these uncashed funds ultimately falls on the plan sponsor. This creates a fiduciary obligation to act in the best interest of the participant while ensuring compliance with IRS and Department of Labor (DOL) regulations.
Sponsors are encouraged to maintain up-to-date contact information for all plan participants and to follow up promptly when checks remain uncashed. This may involve sending reminder letters, making phone calls or using certified mail to confirm receipt. In some cases, plan sponsors may also consider using electronic payment methods to reduce the likelihood of checks going uncashed in the first place.
The IRS and DOL have issued guidance on how to handle these situations, including the use of forfeiture accounts and escheatment to state unclaimed property programs. However, these options come with their own set of rules and potential pitfalls. For example, using a forfeiture account may require the plan document to explicitly allow for such treatment. Escheatment laws, which allow the government to assume control of unclaimed property, vary by state. As such, plan sponsors must carefully evaluate their options and consult with legal or compliance experts as needed.
Another important consideration is the documentation of all the efforts made to contact participants and resolve uncashed checks. Maintaining a clear audit trail can help demonstrate fiduciary prudence and protect the plan sponsor in the event of an audit or legal challenge. It is extremely important to have a written policy in place that outlines the steps to be taken when a check remains uncashed beyond a certain period.
By taking a proactive, well-documented and compliant approach, employers can fulfill their fiduciary duties, reduce administrative burdens and ensure that participants receive the benefits they are entitled to.
Source: Retirement Management Services – “Uncashed Distribution Checks” https://www.consultrms.com/Resources/59/Plan-Sponsor-Tips-and-Help/212/Uncashed-Distribution-Checks
Divorce and the Retirement Plan
When a participant in a qualified retirement plan undergoes a divorce, the participant’s account balance may be an asset that is split with the former spouse. As the plan exists for the exclusive benefit of its participants, a court order is required to transfer the participant’s benefits to the ex-spouse. Once approved by the plan administrator, this court order is called a Qualified Domestic Relations Order (QDRO).
The QDRO is a judgment, decree or order that must be issued by a state authority (usually a court). It can be part of the divorce settlement or it may be a separate document. Because of the serious nature of separating the participant’s account balance, the QDRO is more than just an agreement made by both parties — it must also be signed by a judge.
A QDRO will describe how to divide the participant’s account balance between the participant and the ex-spouse, referred to as the alternate payee. In some cases, a set dollar amount will be allocated; in others, a percentage of the account may be designated. In the latter case, the amount assigned to the alternate payee represents the given percentage of the participant’s total vested account balance as of a specified valuation date. This percentage will apply to all sources — such as deferrals, matching or profit sharing — unless specified by the QDRO. Any interest and investment gains/losses that accrue between this valuation date and the date the funds are separated into an account for the alternate payee are often factored into this final calculation. If the participant has outstanding loans, the QDRO will usually indicate how the loans are handled.
Contributions such as deferrals and employer matching made after the valuation date are credited to the participant’s account. Earnings and losses are applied to the account balances. Once the division is complete, the alternate payee’s portion (either dollars or shares) is transferred to an account in the alternate payee’s name.
If the plan allows, the alternate payee may be paid out in a cash or rollover distribution. Not all plan documents allow the alternate payee to receive a distribution before reaching normal retirement age, so it’s important to follow the terms of the plan. In addition, the QDRO cannot violate the provisions of the plan document by requiring a plan to provide an alternate payee or participant with any type or form of benefit not otherwise provided under the plan.
Although the most common situation for a QDRO is a divorce, it can be issued in other situations, such as to a dependent in the case of child support. If the alternate payee is a minor child or legally incompetent, the order can also require payment to the individual with legal responsibility for the alternate payee. If a participant or their attorney provides you with a copy of a divorce decree that references the plan or a QDRO, please contact us immediately, and we will work with you to ensure it meets the requirements of the plan.
Important note for defined benefit plans: For 2025 plan years, PBGC premiums are due one month earlier than usual, specifically on the 15th day of the ninth month after the beginning of the plan year. For calendar year plans, this means the premium is due on September 15, 2025, instead of the usual October 15. This accelerated deadline is due to a provision in the Bipartisan Budget Act of 2015.
Upcoming Compliance Deadlines for Calendar-Year Plans
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