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Is Your Benefit Plan on the Right Track? Recent Project Reveals Common Errors in Plan Administration

A recent IRS audit project revealed that the most common error made by sponsors of small defined contribution plans (plans with assets between $100,000 and $250,000) is failure to purchase adequate bonding insurance for plan administrators and fiduciaries who handle pension funds.

Under ERISA, benefits plans are generally required to purchase bonding insurance equal to at least 10% of the dollar amount of the assets held in trust, provided that the plans spend no less than $1,000 or more than $500,000 on the insurance.

Other common errors identified by the audit project included failure to amend and comply with current regulatory guidance; failure to make timely deposits; and failure to properly test for nondiscrimination. Failures to comply with ERISA regulations and the Internal Revenue Code guidelines for benefits plans such as Section 401(k) plans can result in the loss of qualified status of the plan. As such, plan administrators and fiduciaries should take steps to ensure that plan activities are in accordance with the most recent rules and regulations.

Please contact the benefits attorneys at Bingham McHale with any questions regarding bonding insurance requirements or any other benefit and pension plan compliance questions.

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