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Top Ten Strategies for Year-End Planning

December 3, 2020

The end of the year is approaching—it’s a great time to review your employee benefit plans to ensure they’re compliant and up to date. Below are our top ten strategies:

  1. Is your plan on track to require an audit? Generally, most existing benefit plans require an audit once the number of eligible employees exceeds 120 on the first day of the plan year. Review the “80-120” rules in the Internal Revenue Service (IRS) Form 5500 instructions.
  2. Verify that your plan is properly making automatic cash-outs for participants that are no longer active and are within the thresholds set by the plan document. This could reduce your number of eligible employees below the audit threshold.
  3. Does your plan have a balance in the forfeiture account? The IRS requires that such funds be used on an annual basis and not be permitted to accumulate. Refer to your plan document regarding how the forfeitures should be used. For instance, should they be used to reduce employer contributions or pay plan expenses? Be sure the process is followed.
  4. Review your plan’s participant deferral remittance procedures and verify that the funds are being transferred into the plan as soon as administratively possible. You may need to accelerate the process.
  5. Is it time for the plan to adopt auto-enrollment and/or auto-escalation? These are great ways to encourage your employees to start saving for retirement.
  6. Will your company be paying a year-end bonus to its employees? Refer to your plan document to determine if bonuses are considered eligible compensation.
  7. Part of a plan administrator’s fiduciary duty is the continual monitoring of investments offered by the plan. Schedule a review of the plan’s investments with your independent investment advisor and confirm that the plan is in compliance with the investment policy statement.
  8. If your plan document is other than a prototype plan document, verify that the document has been amended to conform with current IRS regulations.
  9. The 2021 limits for some contributions will remain the same as they were in 2020 ($19,500 plus catch-up of $6,500 where applicable) and compensation limits increase to $290,000 for benefit plans. For 2020, consider whether the maximum contributions have been made by the sponsor, or if there are additional contributions that could be made for 2020.
  10. Has your plan implemented any provisions of the CARES Act, including loan deferrals? Be sure you understand the rules and plan amendment requirements.

If you have questions about any of the above items or need assistance, contact your CSH Employee Benefit Plan advisor. We’re happy to help!

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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