Business Workshop: Common 401(k) mistakes
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Some of the most common mistakes companies and their consultants make in administering 401(k) plans are errors in determining which employees are eligible and what income is eligible for the plan.
That is what the Internal Revenue Service is telling employers in a recent advisory that lists common mistakes found in audits by the IRS Employee Plans Team Audits program.
Failure to follow a plan's eligibility and participation provisions can result in costly penalties for plan sponsors.
Here are some of the other most common mistakes on the IRS' new list of 401(k) snafus:
• Failure to amend the plan document for tax law changes by the end of the period required by law.
• Failure to apply matching formulas properly and as stated in the plan document.
• Mistakes in how employers determine how much benefits to highly compensated employees can exceed benefits to other employees covered in the plan.
• Failure to follow the terms of the automatic enrollment language under the terms of the plan and/or the Pension Protection Act of 2006.
The research focused exclusively on retirement plans with more than 2,500 participants, but smaller employers can learn from the mistakes that large employers make. And perhaps the most important lesson for smaller employers is to make sure to work with 401(k) consultants and third-party administrators who have a track record of keeping up with legal and regulatory changes, from document creation and maintenance to compliance testing and reporting.
-- Arthur Hazen,
BPU Investment Management, ahazen@bpuinvestments.com
Employees who use company e-mail for personal matters do not necessarily give up their right to privacy, according to a recent decision by the U.S. District Court for the District of Columbia.
In the case, a federal employee fought to keep confidential a series of personal e-mails sent between himself and his attorney over government computers. He argued that although he had used the company system, private matters discussed in the e-mails should be protected by the attorney-client privilege.
The court ruled that because the employer's technology policy did not include a specific statement banning the personal use of company e-mail, the employee had a reasonable expectation of privacy. The e-mails in question were covered by the attorney-client privilege and could in fact remain confidential.
The case dismisses the commonly held belief that employees give up any expectation of privacy when they use company computers or accounts to send personal e-mails. The court ruled that unless there is a clear policy restricting the use of work e-mail for personal matters, employees have the right to keep these messages private.
This decision is the latest in the ongoing conflict over whether or not the attorney-client privilege applies to electronic communication. As the use of technology continues to expand in the workplace, the stage is set for an increasing number of privacy disputes.
To avoid a costly legal battle, employers should make certain they have a technology policy in place that explicitly states the company's guidelines for the personal use of computers and e-mail accounts.
- Beth Slagle,
Meyer Unkovic & Scott, bass@muslaw.com
First Published December 30, 2009 12:35 am
