---
title: "Ensuring Compliance with Document Provisions"
date: 2013-10-02
author: "Site Admin"
categories:
  - name: "Articles"
    url: "/category/articles.md"
---

# Ensuring Compliance with Document Provisions

Sometimes we get in the weeds, surrounded by IRS, DOL and PBGC regulations, and lose sight of the plan provisions.

Your plan document is the first set of instructions that you must follow to keep your qualified plan in compliance. Failure to follow the terms of the plan can result in disqualification!

The document is scary! It is a legal document with a lot of provisions that are, sometimes, difficult to navigate.

Let’s start with the basics:

Eligibility – there are really three parts to eligibility:

1. Who is eligible?
2. What must an eligible employee do to be eligible?
3. When does an eligible employee enter the plan?

The plan document will define “eligible employee” – typical definitions may call for the exclusion of non-resident aliens or union employees. You must understand *who* is eligible for the plan.

The plan document will set forth criteria that must be met prior to an eligible employee entering the plan – many plans require one year of service or attainment of age 21.

Finally, the plan will dictate when an eligible employee who has met the eligibility criteria will enter the plan – it could be the very day they complete the eligibility or it could be only two times per year (e.g., January 1st and July 1st for a calendar year plan).

*Find these sections in your plan document and highlight them!*

Contributions –

1. What kinds of contributions are provided?
2. What does a participant have to do to “earn” a contribution?
3. How are contributions allocated?

401(k)/Profit Sharing Plans can provide several different types of contributions. Typical contribution types include: deferrals (pre-tax or ROTH), match (fixed or discretionary), profit sharing, and safe harbor contributions (non-elective or match). While many employers engage a Third-Party Administrator (TPA) such as Pinnacle Plan Design, LLC to help them, it is important that the employer understand what is offered in their plan.

Certain contributions can have conditions, that is, the plan may require a participant to complete 1,000 hours or be employed on the last day of the plan year to receive an allocation.

Finally, it is important to understand how contributions are allocated to participants.

- Deferrals are the contributions that the participants elect to remit from their paycheck. These amounts should be timely remitted to the Trust.
- In the case of a matching contribution, only those who defer will get the match according to the matching provisions. Matching provisions can be couched in terms of a percentage of compensation deferred up to a specified percentage or dollar amount.
- Profit sharing contributions can be allocated uniformly or can be allocated according to groups of participants.

*Find these provisions in your plan document and highlight them!*

Distributions –

1. When can I get my money?
2. How soon can I have my money?
3. Why can’t I have my money?

These are popular questions that plan sponsors get. With certain exceptions, a participant can get his/her money when they have a “distributable event”. A distributable event is: termination, death, disability, or retirement.

Some plans allow hardship distributions; others allow in-service distributions or loans.

It is important that you understand who, when and why a participant can get a distribution from the plan.

*Find these provisions in your plan document and highlight them!*

These are the main “trouble” areas for plan sponsors – Eligibility, Contributions and Distributions. If you have a competent TPA they can help you navigate the laws and regulations; however, in these three areas, by the time they know about the problem it is too late. If you need help uncovering the provisions in your plan please ask your retirement plan professional.

![Sheri Alsguth](http://pinnacle-plan.com/wp-content/uploads/2013/03/Sheri-Alsguth-CGM_5820_ex-199x300.jpg)

   
Sheri Alsguth is an actuary at Pinnacle Plan Design with over 20 years of retirement plan experience.