Spring Cleaning
Cybersecurity & ERISA Compliance: Protecting Your Plan
The Plan Document: Why Understanding it Matters
An employer-sponsored retirement plan is an extremely valuable benefit a company can offer its employees. At the heart of this benefit is the plan document—the official rulebook that explains exactly how the plan works. For plan sponsors, understanding this document isn’t just helpful; it’s essential. Here’s why:
It keeps the plan compliant.
The plan document spells out the rules that make the plan comply with government laws and regulations. These rules cover everything from eligibility requirements to contribution limits and distribution options. If the company doesn’t follow these rules, it could face serious consequences, such as fines, audits or even the loss of the plan’s tax advantages. By knowing what the document says, plan sponsors can make sure the plan stays in compliance and avoid costly mistakes.
It helps you run the plan.
The plan document provides clear instructions on how the plan should operate day-to-day. It explains who can enter the plan, when they can enroll, how contributions are calculated, and when employees can withdraw their account balance. If these rules aren’t followed, errors can occur—such as enrolling someone too early or miscalculating contributions. Such mistakes can be expensive and time-consuming to fix. Understanding the document helps sponsors keep their plan running smoothly.
It protects employees and the plan sponsor.
Plan sponsors have a fiduciary responsibility, which means they are obligated to act in the best interest of employees. Knowing the plan’s provisions ensures that decisions about investments, distributions, and other plan features are made fairly. This not only protects employees’ retirement savings but also helps the company avoid potential legal challenges.
It makes changes easier.
Laws and company policies evolve over time, and retirement plans often need to be updated to reflect changes. If plan sponsors understand the current plan provisions, they are better equipped to make updates more efficiently and avoid creating conflicts or gaps in the rules. This proactive approach keeps the plan flexible while remaining compliant.
It improves communication.
Employees will have questions about their retirement benefits. When can they start contributing? When are they eligible for a distribution? Plan sponsors who understand the plan document can provide clear, accurate answers. This builds trust and helps increase employee confidence in their retirement planning.
As you can see, the plan document isn’t just paperwork—it’s the foundation of the retirement plan. For plan sponsors, understanding the plan document means staying compliant, avoiding costly errors, protecting employees, and ensuring smooth operations. As your TPA, we’re here to help you build this foundation and maintain a successful benefit for you and your staff.
Understanding RMDs: What Plan Sponsors Need to Know
As a plan sponsor, it’s critical to understand the rules surrounding Required Minimum Distributions (RMDs) because they directly impact compliance, participant education and operational processes. RMDs are mandatory withdrawals from qualified retirement accounts, and failure to handle them correctly can lead to penalties for participants and fiduciary risks for your plan.
In general, participants who turned age 73 in 2025 are mandated to take their first RMD from qualified retirement plans. This requirement stems from the SECURE Act 2.0, which raised the RMD age from 72 to 73 starting in 2023. For employees born in 1960 or later, the RMD age will increase to 75 in future years. Awareness of the shifts in these age thresholds is necessary for identifying which participants are affected in any given year. Please note that distributions from an IRA will not satisfy the requirement for an RMD from a qualified plan.
For qualified retirement plans, if the plan document allows it, most active employees have the option to delay RMDs until they retire. However, a 5% owner of the business must begin distributions at the appropriate age regardless of employment status. Plan sponsors should ensure these distinctions are clear. The 5% ownership threshold includes ownership attributed from other family members.
Your role is to make sure the plan complies with IRS rules. In terms of RMDs, your responsibilities will include:
- Identifying affected participants: Work with us to flag employees who have reached RMD age, as well as any 5% owners who haven’t retired.
- Communicating deadlines and amounts: Provide clear instructions to participants about when and how much they need to withdraw.
- Monitoring distributions: Confirm that you have methods in place for tracking and processing RMDs to avoid errors.
The timing of RMDs is critical. Missing these deadlines can trigger penalties:
- A participant’s first RMD is due by April 1 of the year after reaching RMD age.
- Subsequent RMDs must be completed by December 31 each year, creating the possibility of two distributions in the first year.
The RMD amount is calculated based on the prior year-end account balance divided by a life expectancy factor set by the IRS. Plan sponsors don’t calculate these amounts directly, but they should understand the process to answer participant questions and verify accuracy.
Failing to take an RMD can result in a 25% excise tax on the amount that isn’t withdrawn. For plan sponsors, improper handling of RMDs can lead to fiduciary concerns and potential IRS scrutiny.
While RMDs are technically a participant responsibility, they also represent a compliance obligation for your plan. By proactively identifying affected employees, confirming administrative processes, and communicating clearly, you reduce risk and support participants in meeting their distribution requirements.
Upcoming Compliance Deadlines for Calendar-Year Plans
March 2 |
|---|
| IRS Form 1099-R Copy A – Deadline to submit Form 1099-R Copy A to the IRS for participants and beneficiaries who received a distribution or a deemed distribution during the prior plan year. This deadline applies to scannable paper filings. For electronic filings, the due date is March 31, 2026. |
March 15 |
| ADP/ACP Corrections – Deadline to process corrective distributions for failed ADP/ACP tests without a 10% excise tax for plans without an Eligible Automatic Contribution Arrangement (EACA). |
March 16 |
| Employer Contributions – Deadline for employer contributions for amounts to be deducted on 2025 S-corporation and partnership returns (unless extended). |
April 1 |
| Required Minimum Distributions – Deadline to distribute a required minimum distribution (RMD) for participants who attained age 73 during 2025. |
April 15 |
| Excess Deferral Correction – Deadline to distribute salary deferral contributions plus related earnings to any participants who exceeded the IRS 402(g) limit on salary deferrals. Employer Contributions – Deadline for employer contributions for amounts to be deducted on 2025 C-corporation for filers with a calendar fiscal year end and sole proprietor returns (unless extended). |
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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