Human Resources |
It’s time for schools to take action in regard to employees' retirement plans, Kaye Steele, president and founder of Access Retirement Services, reminded participants in a recent NBOA webinar, “403(b) Plan Remedial Amendment Period (RAP): What Should You Be Doing?”
RAP refers to the period before March 2020 by which employers must review their 403(b) plans and make sure that they are compliant on paper and in operation.
Steele, whose company helps independent schools and other organizations design, administer and comply with retirement plans, discussed potential document issues that can be corrected, such as the absence of a required provision like the 415 limit; an erroneous required provision like the 402(g) limit; or the failure to adopt a required amendment like the HEART (Heroes Earnings Assistance and Relief Tax) amendment.
She also pointed out potential operational issues — where a plan's operations don’t match its document provision — that can be corrected during the RAP time period. These include universal availability; an employer contribution formula that doesn’t match the formula in the plan document; or a failure to adopt a written plan document in a timely manner.NBOA members and webinar attendees can view the full presentation, slides and transcript at NBOA.org.
Steele said that the top issue she sees is with universal availability — the improper exclusion of part-time employees.
“You can exclude [employees] by part-time, full-time, temp, seasonal, anything along those lines as far as making the individual 403(b) contribution,” Steele told attendees. But there’s “a rule out there called the 20-hour week rule… [I]f you hire somebody with the intent to say that they will only work 20 hours per week or less and no more than 1,000 hours in a plan year, they can be excluded. [But] in order to exclude them it has to say that in your plan document. You can’t use that rule if it’s not a part of your plan.”
The other item that gets employers into a jam, she said, involves rehires. She cited the example of a retired teacher coming back as a substitute. “They probably won’t want to participate in the retirement plan,” she said. “But, you need to document in your file that you have offered that person the opportunity to do so. The general rule is, 'once in, always in' on the employee side.”
Steele told webinar participants they “can use this remedial amendment period [for] self-corrections of either document or operational issues.” If employers don’t self-correct, she cautioned, they may face an IRS or a Department of Labor audit.
With a Self-Correction Program (SCP) under the IRS, an employer fixes the document and “retro[s] it back to an earlier day and potentially fix some of the issues on the operational side. But those issues have a timeframe, usually a couple years from when the error occurred, [within which] you can fix it,” Steele said. (Learn more about these IRS programs.)
Or, you fix issues through voluntary compliance program (VCP), which typically means paying a fee and completing paperwork to file through the IRS.
If you don’t fix the errors and the IRS or DOL finds them, then you go to Audit CAP (Audit Closing Agreement Program), Steel said. “You will still fix [the issue] and pay to have it fixed, but you’re fined. It’s more of a sanction. Bottom line, instead of you saying ‘I want to fix this and pay my $2,000,’ under [Audit Cap] they will come in and probably double the fines of what you would have paid if you’d have gone through VCP or SCP.”NBOA members and webinar attendees can view the full presentation, slides and transcript at NBOA.org.#403b#EmployeeBenefits
Sign in to leave a comment
Get Net Assets NOW
NBOA's free twice-monthly newsletter
1400 I Street, NW, Suite 675Washington, DC 20005www.nboa.org