Some 401(k) plans, especially sizable ones, can benefit from the efficiencies of a bundled provider. However, what’s lacking in such arrangements is personalized attention to the plan. Without the watchful eye of a third-party administrator overseeing plan operations and design, errors often occur.
Pinnacle Plan Design collaborates with employee benefit plan auditors and plan sponsors to correct these errors and preserve the qualified status of the plan.
Top 3 Errors Found During a 401(k) Audit
- Incomplete or inaccurate census data
- Timing delays between eligibility and first 401(k) deferral
- Improper computation of matching contributions
Pinnacle Plan Design Can Help
As a third-party administrator of 401(k) plans, we are able to identify the course of action required to correct plan errors like these and others. Regardless the severity of the error(s), we can assist, whether it’s a simple self-correction issue or a more involved series of errors that require ERISA counsel. Pinnacle acts as the employer’s advocate, doing the leg-work on the correction process and only seeking counsel when necessary, thus keeping costs down.
Here’s the 401(k) error correction process:
- Identify error
- Identify corrective measures
- Complete VCP submission or self-correct, if permitted
- Get plan back on track
Client Success Story – Company X
Company X’s 401(k) audit revealed an issue with regard to compensation. The company had not withheld the correct amount of pay as elected by the participants because the company did not use the plan’s prescribed definition of compensation. As a result, the company was facing costly corrective contributions.
Pinnacle Plan Design was hired to investigate and correct the error. We compiled evidence, analyzed the numbers and determined that if we could get the IRS to approve a retro-active plan amendment adjusting the definition of compensation, the company could avoid all corrective contributions. We collaborated with ERISA counsel to confirm our work and strengthen our position.
In the end, the IRS approved our request and the plan sponsor saved thousands in corrective contributions.