I was enjoying the spring weather at lunchtime today, and as I was returning to the office it struck me that pension administration has its seasons too. The vast majority of plans are run on a calendar year, so our office gets carried along a wave of work cycle to properly administer those plans. If you have or want a 401k for your company, you'll need a 401k TPA (Third Party Administrator 401k) - And you'll need one who understands the annual flow of the plan.
There is certainly no hibernation for pension administrators in winter! The first of winter at the end of December is when we get a flurry of requests to set up new plans, amend existing plans, pay distributions to plan participants, process required minimum distributions, run contribution projections and so on.
In January we are printing tax forms for participants who received payments from our clients’ plans in the prior year. We also start getting in data for prior year plans. We are proud of our data requests – we have fine tuned them year after year. At this point we provide templates to help our clients cross check the employee information that they send to us for accuracy – one to confirm that all compensation is reported, and one to reconcile deposits made to the plan. Good data results in good annual pension administration reports!
Tax season in February and March have our clients’ CPAs asking us for contribution calculations that can be deducted on their income tax returns. The 401(k) and 403(b) plans that have failed compliance tests need to have corrections completed by March 15 to avoid penalties. Winter is indeed a very busy time!
Now that we have gotten most of our clients’ employee data reviewed and the contributions and compliance run, we are ready to complete the administration of the plans. This second step is where we review the client deposit records, and confirm that they posted correctly to the trust. We prepare a set of financial statements for the trust – an Income Statement and a Balance Sheet. We post distributions paid, allocate investment gains, deduct fees, and prepare the Form 5500 tax filings.
Our goal is to have 80% of the calendar year plans’ pension administration completed by the end of spring. So far we are on track to meet that goal in 2012. The majority of our clients provided us with complete and accurate information early in the year, so it’s simply a matter of having a chance to complete each plan now that most compliance and contribution calculations were completed in March.
Summer in Sacramento is spectacular; long sunny days and warm evenings. We still have pension administration work to do every day, but the bulk of the calendar year filings are done. Some reasons that plans might not be done by summertime include the following:
- The 2011 employer contribution has not been determined and/or deposited
- We identified a problem when completing the trust accounting. Perhaps a deposit is missing or allocated incorrectly.
- Certain assets may need special valuation – real estate or company stock held by the plan, for example.
We also have non-calendar year plans to do during the summer, but in general summer is a good time for staff to take their vacations.
Many companies start their year-end and next-year planning after Labor Day, so we start getting busy again in September. New Safe Harbor 401(k) plans must be established by October 1 to qualify as Safe Harbor under the regulations. Plan design review, compliance review, and contribution projections, are often on our radar screens during this time of year.
The final deadline for filing Form 5500 for calendar year plans that are on extension is October 15. We always try to be done no later than October 1, so our clients have a little time to review and submit their filings.
Participant notices for a variety of pension administration issues are due 30-90 days before the beginning of the year. We start preparing those at the beginning of November for delivery by November 15. These notices include:
- Safe Harbor notices
- Automatic Enrollment disclosures
- Qualified Default Investment Arrangement updates
- Fee disclosure reports
In December we are drafting documents for new plans, and making sure that all remaining “to do” tasks are complete so that our clients’ plans are all cleaned up before the end of the year. We assemble and post our Annual Data Requests to our website, and we’re ready to head again into Winter and another year.
Some people say that California doesn’t have seasons. I know that we certainly have seasons in the pension administration business! If you need a 401k TPA, give us a call - 916.922.3200. We'll pick up, no phone trees, just people ready to help.
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