Corporate America measures success by the “Fortune 500.” Radio listeners fondly recall Casey Kasem’s “American Top 40” list of hit songs. And movie buffs know that “The Dirty Dozen” helped win World War II.

Every industry has important “lists” that help define it. The 401(k) retirement plan marketplace has its own list compiled by the Internal Revenue Service (IRS) on the top 11 most common mistakes committed by plan sponsors. Why 11 and not 10? Because this list comes from the IRS–not Hollywood. And this column deals with the top five mistakes; the remaining six will be addressed in an upcoming edition.

Although any list put out by the IRS can make palms sweat and throats constrict, this document can actually prove beneficial for you to review with your clients. Doing so can actually help plan sponsors improve the effectiveness of their 401(k)s and avoid potential problems down the road. And given the tight competition among financial advisers, reviewing the list and providing your clients with assistance to correct these mistakes can help differentiate you in the marketplace.

(1) So what’s the first mistake identified by the IRS? It’s the failure of plan sponsors to ensure their plan document has been updated in a timely manner to reflect recent changes in law. Judging by the blizzard of new rules and regulations proposed at the federal level during the past several months to reform 401(k)s, the next few years could potentially spell many changes for plan documents. The Service recommends that plan sponsors review their plan documents annually, maintain regular contact with their plan provider, and rely on a “tickler” file as a reminder of when amendments must be completed.

(2) The second mistake listed is failure to follow the terms of the 401(k) plan. Plan sponsors are urged to communicate with plan participants and plan service providers about any changes to the plan such as new contribution limits or law changes on a “timely basis.” Due diligence should be conducted annually to ensure that terms of the plan are being followed.

(3) Number three is the incorrect application of the plan’s definition of compensation for deferrals and allocations. The suggested remedy is to ensure proper training for whoever is responsible for determining compensation and annually reviewing compensation definitions. As with anyone responsible for compensation (especially if that person might be responsible for your compensation), broach the need for training gently.

(4) The fourth mistake is the misapplication of employer matching contributions to eligible employees when an employer miscalculates an employee’s compensation. The IRS urges plan sponsors to contact their plan administrator to ensure they have “adequate and sufficient” records about employment and payroll.

(5) As Casey Kasem might say, “coming in at number five is the failure of 401(k) plans to satisfy nondiscrimination tests.” No, Casey wouldn’t really say that. But plan sponsors who fail the tests, either for the Actual Deferred Percentage (ADP) or the Actual Contribution Percentage (ACP), should consider a Safe Harbor Plan or automatic enrollment, according to the IRS. Another helpful tactic is to work with the plan’s administrator to ensure all employees are classified correctly and to familiarize the plan sponsor and administrator with the plan’s terms.

Committing any of these common mistakes can cause headaches for plan sponsors and potentially more pain for plan participants (and for you, the adviser brought in to help the plan run more smoothly). Reviewing this list with your clients – once they wipe off their sweaty palms and clear their throats – can be a tremendous help. And you might even make their “Top 10” list of most popular people.

E. Thomas Foster Jr., Esq., is The Hartford’s national spokesperson for qualified retirement plans. Foster works directly with broker/dealer firms and advisers to help them build their qualified retirement plan business and educate them about industry issues.

This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. This information cannot be used or relied upon for the purpose of avoiding IRS penalties. This material is not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice.