When I look at plan errors, one major area of a plan keeps coming up: compensation issues. Compensation issues deal with the definition of Compensation in the plan as well as when salary deferrals are dealt with in the plan.
I’ve come across so many plans where the wrong definition of Compensation is being used which usually require the employer to make a corrective contribution to the Plan. Other compensation issues deal with untimely deposits of 401(k) deferrals (I have a complete side business of dealing with employers in that area) and so many issues with payroll especially employees trying to modify their deferrals.
As an employer, you need to sit down with your payroll provider and your third-party administrator to make sure that there are no issues in dealing with Compensation because I think it frequently is becoming one of the biggest issues with 401(k) plans.
