Compliance October 9, 2007

Is Something Wrong With a Plan? IRS Shares Common 401(k) Mistakes

The Internal Revenue Service (IRS) has released a list of the 11 most common mistakes made in the administration of 401(k) plans and how to correct or avoid those errors.
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The agency first uses a table to summarize the potential mistake, how to identify that mistake, how to correct that mistake, and how to avoid the mistake altogether. Each component of the table is linked to a more detailed explanation.

The 11 questions to ask are:

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  1. Has your plan document been updated within the past few years to reflect recent law changes?
  2. Are the plan’s operations based on the terms of the plan document?
  3. Is the plan’s definition of compensation for all deferrals and allocations used correctly?
  4. Were employer matching contributions made to all appropriate employees under the terms of the plan?
  5. Has your plan satisfied the nondiscrimination tests?
  6. Were all eligible employees identified and given the opportunity to make an elective deferral election?
  7. Are elective deferrals limited to the amounts under Internal Revenue Code section 402(g) for the calendar year? Have any excess deferrals been distributed?
  8. Have you timely deposited employee elective deferrals?
  9. If the plan was top-heavy, were the required minimum contributions made to the plan?
  10. Were hardship distributions made properly?
  11. Have you filed a Form 5500 series return and have you distributed a Summary Annual Report to all plan participants this year?

The full 43-page checklist and explanation from the IRS is here.

Products October 8, 2007

Lincoln Unveils Retirement Program for Small to Mid-Sized DC Plans

Lincoln Financial Group has released a retirement program for small-to-mid-sized plans that uses a mutual fund and collective fund-based platform, including recordkeeping and administrative solutions.
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The new program, Lincoln SmartFuture, offers 110 investment options, fiduciary guidance, discretionary account advice services, a flexible pricing structure, and program support for plan sponsors, according to a press release.

The fiduciary guidance offered by the plan includes investment selection, monitoring, evaluation, and substitution services. The program also provides plan participants with investment advice and education services geared toward individual learning styles, the company said.

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The Lincoln SmartFuture program can be used for a variety of defined contribution plans including 401(k), 401(a), governmental 457 and 403(b) plans.

The product also includes Lincoln LifeSpan education and investment models geared toward individual learning styles designed to help participants build investment knowledge with the option of investing in funds that combine a retirement target date with a participant’s risk tolerance.

“The Lincoln SmartFuture Retirement program is a significant offering for plan sponsors,” said Westley Thompson, president of Lincoln Employer Markets, in the news release. “The launch of Lincoln SmartFuture helps complete our product continuum and enables us to provide smaller-to-mid size employers with features generally reserved for plans of larger organizations.”

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