Avoiding Retirement Plan Compensation Errors
The amount your company can contribute to your retirement plan and deduct for federal income-tax purposes generally depends on the amount of compensation you pay employees. Using an incorrect definition of compensation in your retirement plan can lead to costly operational failures that can affect your plan’s qualified status.
To help plan sponsors, the IRS’s website provides five tips for avoiding compensation-related plan failures:
- Review your plan document’s definition of compensation for each plan purpose
- Use the statutory definition of compensation when required
- Transmit accurate compensation data for each employee to your payroll processor and plan administrator
- Consider amending your plan to use one definition of compensation for all plan purposes
- Periodically review your plan for errors and fix them as quickly as possible using the IRS’s Employee Plans Compliance Resolution System (EPCRS)
If you have any questions or need assistance about retirement plan compensation, don’t hesitate to call Jerry Smith.