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Compliance & Administration

As a retirement plan sponsor, you probably know how important it is to comply with the Employee Retirement Income Security Act (ERISA) and the ever-changing reporting and disclosure requirements mandated by the federal government. You probably also know how confusing it can be. There are myriad agencies overseeing the design and administration of retirement plans, with literally thousands of regulations – federal, state, and local – which may at times seem contradictory. Pathfinder can help you mitigate the risk of non-compliance and keep you and your organization fully up-to-date with all rules and regulations regarding your plan.

  • All discrimination testing
  • Plan audits
  • Form 5500 and notice requirements
  • Nondiscrimination regulations
  • Plan administration and design
  • Legislation and legislative trends
  • Tax law
  • Fiduciary liability
  • And more!

Compliance Tests Must Be Applied Regularly

  • General test for all retirement plans demonstrating long-term benefits for top executives are not unfair.
  • Minimum distribution requirements ensure participants are receiving appropriate annual distributions.
  • Maximum compensation rules to determine whether distributions exceed the legal limits.
  • Average deferral percentages, to ensure that 401(k) salary deferral contributions made by highly compensated employees do not violate specific ratios.

The above are just a sampling of regulations which are stringent and often overlapping. It’s not uncommon for companies to ‘fall out’ of compliance – at a cost to the organization and participants – and for the plan to need ‘tweaking’ to reestablish its validity.

The tests for compliance vary. Here are some basics that will help you determine if your plan is in compliance:

Contributions or benefits provided under the plan must not discriminate in favor or highly compensared employees.

The average of the actual deferral percentage for eligible highly compensated employees as compared to non-highly compensated employees must not exceed the lesser of 2 percentage points or 200%.

The average of the actual contribution percentage for eligible highly compensated employees as compared to non-highly compensated employees must not exceed the lesser of 2 percentage points or 200%.

Generally, a deduction by the company is allowed for the taxable year when paid, in an amount not to exceed 25 percent of the compensation, otherwise paid or accrued during the taxable year to the beneficiaries under the stock bonus or profit-sharing plan. Additional deduction opportunities are available to certain ESOPs.

Employee stock ownership plans include rules related to qualification, allocation, discrimination, voting rights, diversification, and distributions.

Please send an email to if you are interested in detailed information.

Defined contribution plans may not allocate contributions and other additions with respect to a participant of an amount not greater than the annual IRS Dollar Limit or 100% of the participant’s compensation.

A plan is Top-Heavy if, as of the determination date, the cumulative accounts (or accrued benefits) of key employees under the plan(s) exceed 60% of the cumulative aggregate of the accounts (or accrued benefits) under the plan for all employees. Top-heavy plans must allocate minimum contributions (or accruals) and maintain a minimum vesting schedule.

The plan must hold at least 30% of the stock after the sale of a corporation in order for selling shareholder(s) to avoid recognition of capital gains on the stock sale. Additionally, family attribution rules apply in that certain employees who are related to the selling shareholder(s) or other 25% shareholders may not participate in the plan after the sale.