Employee Benefit Plans: The 411

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

Enrollment Documentation

Did you know that one of the most common errors found in a 401K audit is due to a lack of proper documentation of enrollment?

When a company is required to have their 401K plan audited it is a good idea to make sure that there are proper procedures as well as documentation in place to ensure that the audit can move along as quickly and smoothly as possible.

Procedures: Whether notification about 401K information is given to the employee upon hiring, notified by e-mail at the time they become eligible, or by attending a meeting it is always a good idea to evaluate the procedures you have in place to ensure that they are effective. In some cases a company may think that they have a good set of procedures in place, but how are they working? For instance, if the information is given to them when they are hired, how is the employee reminded once they become eligible?

Documentation: It is always good to ensure that there is good documentation for this process in place. This helps the audit move along quickly and can also assist to resolve any discrepancies that might arise. Proper documentation would include an enrollment form that is signed by not only the participant but by the required HR representative. In addition, if the employee is selecting not to participate this should be included on the form as well. There are a number of companies that do not have the individual sign a form indicating that do not wish to participate. This can slow down an audit as the auditor will have to look for additional means to confirm that the employee truly did not wish to participate and it creates a lack of documentation for the file’s purpose. In addition to the enrollment form, an election form should not only be complete but properly signed.

With the vast amount of companies that are moving all of their forms electronically this can create a barrier to a good paper trail. In some situations, this can be viewed online but it is always a good idea to keep a good paper trail when it comes to the beginning enrollment documentation.

Hopefully this information was helpful and answered your questions; however, if you have specific questions/examples regarding enrollment forms or any other questions about employee benefit plans please feel free to post your questions and/or comments.

Brie Keckler