As the end of the year approaches, retirement plan advisers’ sponsor clients whose plans have a December 31 year-end will need to handle a number of administrative tasks for their plans. Laurie Wieder, a vice president with Alliant Wealth Advisors, has written a blog on ways sponsors can simplify these tasks, “Four Essential Tips to Simplify Year-End Plan Administration,” and PLANADVISER spoke with her on some of the details.

Alliant Wealth Advisors helps coordinate the work of clients’ third-party administrators (TPAs) and recordkeepers so that the reporting is handled cohesively, Wieder says. This is something that other retirement plan advisers, clearly, should consider in order to streamline the work of their sponsor clients.

Year-end plan administration is very complicated, so a best practice would be for advisers to help sponsors vet TPAs and recordkeepers on their ability to handle this work before hiring them, Wieder suggests.

The first area Wieder covers is the year-end notices that need to be sent to participants about their plan’s design. Depending on the design of each plan, she says, these can include Safe Harbor, Qualified Default Investment Alternative (QDIA) and Automatic Contribution Arrangement notices, among others.

TPAs normally handle the Safe Harbor and Automatic Contribution Arrangement notices, while recordkeepers normally handle the QDIA notices, Wieder says. These service providers will generate the notices, and while some will send them out, others forward them to the plan sponsor to issue, she says. Because these come from disparate sources, “it makes sense for the sponsor to have a knowledgeable adviser who can help the client coordinate with the TPA and the recordkeeper,” she says.

There are also Service Provider ERISA 404(c) Fee Disclosures that the Department of Labor (DOL) has required sponsors to send to participants since 2012, Wieder adds. These annual notices can be sent out anytime throughout the year, but to simplify the year-end process, Wieder suggests sponsors send them out with other notices at the end of the year. Recordkeepers are responsible for putting together these notices, which list all of the services participants received and the way in which they were charged, be that on a per participant or pro rata asset basis.

Another suggestion to simplify plan administration is to review a participant census to see if there are terminated participants who can be removed before the end of the plan year, says Wieder.  A plan may require an audit by an independent CPA firm after the conclusion of the next plan year if participant numbers at the beginning of the year reach 120 for a never-before-audited plan or 100 for a plan that previously had an audit.

According to Wieder, November is an excellent time for sponsors to obtain and review the participant census from their recordkeepers. Eligible participants include those who are not making contributions to the plan as well as terminated participants who still have plan balances. Wieder says it is a best practice for sponsors to work with their TPA to have a provision in their plan document that allows them to roll over balances of $5,000 or less for terminated participants into an individual retirement account (IRA). For plans with this provision, it is also a best practice to ensure their recordkeeper can perform these rollovers, including sending out required notices to participants before such rollovers. 

These are examples of all of the “nitty gritty work that recordkeepers and TPAs do that plan sponsors need to be aware of,” Wieder says.

In addition, with year-end bonuses being issued by some companies, now is a good time for sponsors to review, with the help of their advisers and TPAs, how their plans define compensation and whether participant 401(k) deferrals  should be taken from all sources of compensation. In Wieder’s experience, defining compensation is one of the most challenging areas for sponsors.

Finally, Wieder says, “When January arrives, it’s time to provide an annual payroll census to your TPA. Using the census, your TPA reconciles participant payroll and deferral information, performs plan testing to ensure nondiscrimination or suggest remedies to preserve your plan’s tax-exempt status, and provides allowable contribution amounts for profit-sharing. Accuracy is a must. Consult with your TPA to understand your plan’s definition of compensation and break out each aspect of compensation separately: regular pay, bonuses, reimbursements and any other categories pertinent to your operation. Many recordkeepers will make your job easier by providing TPAs with a portal to their recordkeeping site, reducing the number of reports they need to provide.”

She adds: “You can see how important it is to have quality service providers. Otherwise, sponsors end up doing the work themselves.”