Employers and employees have tax-favored options to save for retirement through 401(k). These plans are tax-qualified retirement plans that are subject to the Internal Revenue Code (IRC), and covered under the Employee Retirement Income Security (ERISA), and they also need to comply with numerous legal compliance requirements.
These requirements are generally applicable at the time of plan establishment and for the duration of the plan's term. Employers should review the requirements for 401(k), in order to ensure compliance with applicable law. You can learn more about 401(k) compliance services by searching online.
This review should be done at least once a year. Failure to adhere to these 401 (k) plan requirements could result in the disqualification and loss of tax benefits associated with 401 (k) plans. In addition, monetary penalties or liability can be imposed.
Here is a list of compliance requirements that must be met in order to operate a 401k plan. It should be reviewed periodically.
All tax-qualified retirement plans must be amended promptly for any applicable law changes (e.g. regulatory, statutory or other government-mandated changes) as well as discretionary or optional plan modifications (e.g. changes to the contribution level).
Changes to the plan document may also result in changes to the summary plan description or, where applicable, the summary of material modifications.
Follow the Plan's Terms
A failure to follow the plan's terms could result in tax penalties and breach of fiduciary duties.
Make sure the plan has a proper definition of compensation
Participants' "compensation", as used under the plan, is relevant to calculating contribution allocations and complying with IRC-required nondiscrimination test requirements.