First Quarter Blues

Do I have any Nickels in the retirement industry such as, Financial advisors, Plan Sponsors, TPAs, Compliance representatives? If so, you already know about the Q1 blues. This article is not for my seasoned folks but for my newbies in the industry. I am going to give you some tips to keep you organized to avoid the first quarter blues.

Nic#1: Save the date! Missing a deadline is not fun and in the case of retirement plans may come with a hefty financial penalty. Stay organized by setting calendar reminders. Add 3/15 to your calendar if you work with or sponsor a non-safe harbor 401(k) plan with a calendar year -end. This date is 2.5 months following the plan year-end and is the deadline to process corrections for certain failing compliance tests. Also, depending on the business entity a company’s corporate tax deadline without extension may fall on the same date, 3/15. Be sure to verify the corporate tax deadline with a tax advisor and match plan year-end to the Adoption Agreement. The deadlines will vary for off-calendar years.

Nic#2: Save the date! Add 4/15 to your calendar if you work with or sponsor a 401(k) plan. This is the deadline for the 402 (g) deferral limit test which is always performed using the calendar year-end regardless of a plan’s year-end. While the 4/15 deadline is not within Q1, most plans will perform all testing simultaneously, so this test may be done in Q1. Also, Q1 may be a good time to confirm if employees have deferred into other qualified plans. All deferrals from qualifying plans must be accounted for to determine the limit. As mentioned in Nic#1, missing a deadline is not fun. Excess refunds for participants in violation of the limit, may be subject to double taxation if not corrected timely.

Nic#3: If possible deposit or try to remind your clients to deposit their employer contribution to the trust by the corporate tax deadline (plus extension) for the deductibility purposes. If you work with or sponsor a plan that knows the employer contribution budget, those funds may be deposited in the trust beforehand and ahead of the performance of the calculation to mitigate the risk of missing the deadline. Discuss this option with the plan’s tax advisor and trustee.

Nic#4: If you work with or sponsor a plan be sure to confirm the funding of all true-ups and employer contributions that will be funded after the year-end. Contributions funded after Q1 may impact the timing of the compliance tests or prompt a revision. Loop in the TPA or Record-keeper to confirm the implications and best practices.

Nic#5: If you deal with 401(k) retirement plans, add an ERISA attorney and/or an American Society of Pension Professional (ASPPA) representative to your network. Retirement plans are governed by the Internal Revenue Codes and these subject matter experts are trained to assist with complex retirement plan compliance issues.

Nic#6: Document in writing all interactions that include directive for auditing purposes.

Nic#7: Reconcile payroll and indicative data prior to performing or requesting the performance of a tests and/or calculation. Often times, a hired TPA or Record-keeper will assist with identifying certain discrepancies.

Nic#8: Breath and take breaks. You will quickly become inundated in Q1 so if time permits, take mental health breaks to meditate, exercise, or nap.