Make Your End-Of-Year List and Check It Twice: Employers, Three 401(k) Questions to Ask Yourself

by Neil Tremblay, Managing Director, Coastal Capital Partners

December…it can truly be the most wonderful time of the year, unless, that is, you have yet to tackle your end-of-the-year deadlines for 401(k) employee benefit plans. It’s crucial to not only complete many of these tasks by December 31, but also get ahead by preparing for tax season going into the New Year.

With 2018 around the corner, now is the time to make a list and check it twice, ensuring you’re abiding by the law while reducing risks, liabilities and costs. ‘Tis the season for giving, so here are three key benefits questions you should consider asking yourself before signing off and checking out for tinsel-wrapped holiday gift swaps, ugly sweaters and homemade eggnog.


1. Are there any changes that I need to make to the 401(k) plan for 2018?

Be sure to revisit company goals, employee demographics and 401(k) plan features to ensure your 2018 eligibility terms are appropriate and that you’re offering the plan to the right employees. For example, if your company goal is to recruit top talent in the new year, you may consider choosing shorter service requirements for a 401(k) plan. Alternatively, if your company has had high employee turnover, you may want to move forward with a plan that has longer service requirements to keep transient employees out of the plan and to help reduce your company’s costs and liability.

Another consideration is to increase your plan’s threshold for removing terminated participants from the plan. Based on the Taxpayer Relief Act of 1997, the maximum amount allowed by law is $5,000. This means that if an employee has less than $5,000 in his or her account upon departure, the company can remove this employee from the plan. Administrative costs and liability remain the same whether an employee has $3,000 in the account or $20,000, so consider revisiting your plan’s threshold annually, at the very least. 


Lastly, to minimize common payroll-related errors, companies may want to adjust the definition of compensation to remove fringe benefits, small cash bonuses or restricted stock awards. These are benefits given to employees in addition to hourly wages or salaries; they are taxable to the employee and must be included as supplemental income on W-2 forms.

Some types of 401(k) plans, such as Safe Harbor plans, can only be amended at the end of year for the prospective year, except under certain circumstances. If you plan to make any of these changes, act quickly and coordinate with your record-keeper or third-party administrator to be sure the appropriate documentation is in place.

2. Have all of the required annual 401(k) participant notices been distributed? 

If you haven’t received these notices from your record-keeper or third-party administrator, you should confirm they’ve been distributed to appropriate employees before end of year.

Common forms that must be sent by end of year include:

  • The Participant Fee Disclosure (404(a)(5))

  • Summary Annual Report

  • 401(k) Safe Harbor Notice (if applicable)

  • Qualified Default Investment Alternative Notice (if applicable)

  • Automatic Contribution Arrangement Notice (ACA, EACA or QACA) (if applicable)

Be sure to keep track of when these notices were sent, to whom and the method of delivery to minimize any liabilities.

3. Have I updated my Employee Retirement Income Security Act (ERISA) fidelity bond?

An ERISA fidelity bond is a type of insurance that protects your company’s employee benefit plans against losses caused by acts of fraud or dishonesty. It’s a requirement that every fiduciary of a plan and every person who handles plan funds must be bonded.

ERISA section 412 and related regulations generally require that every fiduciary of an employee benefit plan and anyone who handles funds or other property of a plan must be bonded for at least 10% of the amount of funds he or she handles up to a limit of $500,000 per person per plan. This is not the same as fiduciary liability insurance, which instead insures fiduciaries against losses caused by breaches of responsibility – not theft.


Since 2017 has been a great year for the markets, your company’s plan asset value has likely increased. It’s important to update the amount of the fidelity bond to reflect this increase, unless you’re at the maximum amount required by law.

For your New Year’s resolution, consider getting ahead in 2018! If you prepare for these annual filing requirements throughout the year, your next December may be a bit more joyful and less hectic.

Do you have questions regarding your end-of-year employee benefit responsibilities? Comment with them below and I’ll be sure to respond with my best advice. Or, connect with EBS on LinkedIn and Twitter.

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