We were brought into a plan situation by a new CFO who had discovered issues with their prior plan provider. There was an Advisor who was not a fiduciary, an insurance company recordkeeper, and a Third Party Administrator. The plan was set up as a safe harbor plan, with auto-enrollment. For four years, the recordkeeper mixed up the safe harbor matching contributions with discretionary matching contributions – and each had separate vesting schedules. And the employer had a seasonal workforce, further complicated by the auto-enrollment feature. The plan was in need of an audit and could have been disqualified by the IRS.
We got brought in by a new Advisor once the new CFO discovered the problems. The insurance company recordkeeper wanted $10,000 to fix the problems. We self-reported the problems under the IRS Self Corrections program. All the matching contributions got moved into the proper accounts and the plan was audited and reported as clean once we were caught up.
Best Practice Learned
Sponsors need their service providers to be accountable. In this case with three separate service providers and no fiduciary, no one was accountable. It’s best if the Advisor steps up and accepts a formal fiduciary role and takes ownership over potential issues ahead of time, and works up front with the recordkeeper to build a proper framework for plan success.