Follow the Document; Prevent Mistakes
It's important that your company's internal procedures actually reflect those of the retirement plan document! Here are some examples:
1. How is compensation defined?
Make sure the payroll system is set up to accurately pull contributions from the appropriate sources! Did you exclude fringe benefits or overtime as part of the compensation allowed for deferring into the 401k?
2. Determining who is eligible
How are employees identified and then informed that they are eligible for the plan? This is where your process for updating employee census information becomes very important, but also your system to get the enrollment form or packet out to the employee as well.
3. How are loans made?
Many documents say that "loans are administered according to the loan policy." But, do you actually have a loan policy that outlines the procedure? It's important that loan issuances and repayments follow whatever terms are set forth by the document.
4. Have all contributions been made timely?
Most folks think that the timeline to get this done is up to 14 days. Actually, the money needs to be segregated from general assets and then moved as soon as possible. The DOL looks at the date it could be separated and then was actually deposited to determine if you were ever late. If you usually complete this task in 2 days and then later one deposit goes in on day 5, they could consider that late.
5. Have you sent all the required notices?
It's super important to make sure that you know (based on which plan provisions apply to your plan) when certain notices need to be distributed to participants and have some form of tracking that distribution. You are allowed to use electronic distribution, but make sure you understand the requirements.
If you haven't spent some time on internal processes, good places to get help from are your plan advisor/consultant, your plan auditor, and definitely your ERISA attorney. You can also check out the DOL's website for examples of problems they have found or AICPA - Employee Benefit Plan Audit Quality Center. http://www.aicpa.org/interestareas/employeebenefitplanauditquality/resources/toolsandaids/downloadabledocuments/dol_ebsa_criminal_case_summaries_november2011.pdf