Getting Your Compliance House in Order: Best Practices for ERISA Compliance

In House Focus Presents: ERISA Legal Compliance Hot Topics for In-House Corporate Counsel

New Retirement Plan Limits

One of the most common compliance issues for employers and plan sponsors is failure to adhere to annual retirement plan limits. To avoid costly penalties and administratively burdensome correction procedures, plan sponsors must remain up-to-date with respect to applicable retirement plan limits. Today, November 1, 2018, the IRS announced cost-of-living adjustments affecting the 2019 dollar limitations for retirement plans and other retirement-related items. Please note that the chart below does not include all applicable retirement plan limits, just some of the common ones.

401K Plan Limits

‌

2019

2018

2017

2016

Elective Deferrals

$19,000

$18,500

$18,000

Catch-Up Contributions

$6,000

Annual Defined Contribution Limit

$56,000

$55,000

$54,000

$53,000

Annual Compensation Limit

$280,000

$275,000

$270,000

$265,000

Highly Compensated Employee

$125,000

$120,000

$215,000

$210,000

Non-401K Related Limits

Defined Benefit Plans

$225,000

$220,000

$215,000

$210,000

403(b)/457 Elective Deferrals

$19,000

$18,500

$18,000

SIMPLE Employee Deferrals

$13,000

$12,500

SIMPLE Catch-Up Contribution

$3,000

SEP Annual Compensation Limit

$280,000

$275,000

$270,000

$265,000

Social Security Wage Base

$132,900

$128,400

$127,200

$118,500

Hall Benefits Law, LLC recommends that you consult with ERISA legal counsel to assist you with any questions you may have regarding applicable limits for your retirement plans.

Getting Your Compliance House in Order:

Best Practices for ERISA Compliance

In the business world, getting your house in order relates to analyzing current systems and policies, recommending changes or reorganization where needed. Employers that offer benefit plans should put observing best practices for ERISA compliance at the top of their to-do list.

Plan sponsors and administrators must meet at least the minimum standards of ERISA.

Federal law does not require employers to provide employees with benefits. However, the minimum standards set by ERISA apply to most employers who do offer health and welfare employee benefit plans. This includes employers that provide a full range of benefits, as well as employers that offer only one benefit. All benefit plans that are subject to ERISA must comply with the law’s complicated regulations, rules, and requirements.

Increased DOL and IRS oversight makes compliance even more critical.

Many ERISA regulations focus on protecting the rights of workers. Ignoring or misunderstanding ERISA regulations is not just a disservice to employees, though. Employers who fail to comply with stringent and sprawling ERISA regulations face large fines.

For example, the Department of Labor increased the monetary penalties assessed for ERISA violations effective January 2, 2018. In accordance with the Inflation Adjustment Act, the rates could be increased every year on January 15. In 2018, penalties included:

Failing to file a Form 5500: Up to $2,140 per day.
Failure to provide the Summary of Benefits Coverage: Up to $1,128 per failure.
Unintentional failure to meet genetic information requirements: Capped at $569,468.

Plan sponsors can even be fined for simply refusing to answer information requests from the DOL or the Internal Revenue Service.

The Employee Benefits Security Administration (“EBSA”) enforces ERISA. When you consider the number of 2017 investigations conducted by the EBSA – and the results of those investigations – using best practices for ERISA compliance takes on new meaning:

Civil Investigations: 1,707, with 134 cases referred for litigation
Criminal Investigations: 307, with 113 indictments
Informal Inquiries and Complaints: 174,000 that lead to 617 new investigations

What can employers and plan administrators do keep their compliance houses in order?

Starting with a strong plan helps.

Under ERISA, an employer must provide a written Summary Plan Description for each health and welfare benefit that it offers to employees. A well-drafted plan could prevent future compliance issues. In addition:

Choose your fiduciaries carefully and make sure they understand their responsibilities.
Buy sufficient fiduciary insurance.
Make sure your summary plan description includes language required by ERISA.
Set up policies to handle administration of your plan.
Diversify retirement plans to reduce the risk of losing invested funds.

With a good plan in place, administration becomes a primary concern.

ERISA compliance hinges on steps you take now.

To stay on the right side of ERISA, employers and plan administrators must be careful when communicating with plan participants:

Inform participants about changes by sending a Summary of Material Modification. The plan administrator sends this plain language document no more than 210 days after the close of the plan year.
Issue automatic contribution notices before the plan year starts. In fact, these notices should be sent 30 to 90 days before the year begins. The IRS and the Department of Labor both address automatic contribution notices.
Send participants all required notices. This may sound fairly simple. However, COBRA alone requires a number of notices be sent at specific times.
Provide a Summary Annual Report based on Form 5500 to plan participants. The plan administrator prepares and sends this document nine months after the end of the plan year unless the IRS granted an extension.
Send plan participants information about their retirement plans, including how to claim retirement plan benefits.

Other tasks may seem more administrative in nature, but are still critical to maintain ERISA compliance:

File complete and timely forms, including Form 5500. The IRS imposes penalties for late or missing forms.
Follow the terms of your Summary Plan Description.
Track deadlines like your business depends upon them – because it does. Consider hiring someone with ERISA experience to help with ERISA filings.
Keep complete and meticulously maintained records. ERISA requires that plans keep certain records. For example, a retirement plan must keep transaction records, income statements, balance sheets, and more. The type of records kept is based on the type of plan.

An experienced ERISA attorney can make the difference

It’s not easy to understand and meet government requirements. Be vigilant, knowledgeable, and proactive to ensure your plan’s compliance. Most importantly, get help from people who know ERISA.

At Hall Benefits Law , we work extensively with employee benefit plans, both before and after plans are established. Please call 678-439-6236 to discuss your concerns with an experienced attorney. Our website contains more information about our firm, a Contact Form , and free resources for your review. From our home office in Georgia, we assist clients throughout the United States, from Massachusetts to Montana.