Article first appeared in The Journal Record - May 12, 2011.
Whoever said “don’t sweat the small stuff” never was responsible for administering a company’s 401(k) plan. With so much at stake for both the employees and the companies who sponsor them, retirement plans are, by their very nature, complicated documents. And it’s sometimes the smallest things – like not following a plan’s written definition of “compensation” – that can expose the company sponsor to significant financial and legal liability.
Unfortunately, compensation definitions can be extremely complicated. For example, does the plan’s definition of “compensation” include bonuses or overtime pay? What about any deferred compensation or other benefits provided to the employee? Because of these complexities, the use of inaccurate compensation amounts in plan operations is one of the most common errors.
Article authored by McAfee & Taft Attorney: Alison Patel.
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