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Fool Proof Your 401k Plan Today

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The harsh reality is you may pay more in fees than what is in your retirement! This is the unfortunate reality many are facing, as the Department of Labor estimates 77 percent of 401k plans are out of compliance. To be deemed “qualified,” a 401k plan must satisfy the requirements listed under the Internal Revenue Code Section 401(a). If a plan fails to meet these requirements, then the plan is deemed “disqualified” and favorable tax benefits may be lost.

To avoid these losses and extra fees, 401k retirement plans should be reviewed every year. Use this informal checklist as a means to keep you compliant.

  1. Does your plan reflect recent changes?

A 401k plan must be supported by a formal written document that complies with the Internal Revenue Code. Anytime there is a change, the written document must be amended to reflect the most recent change. Generally, the IRS establishes a deadline by which all changes must be adopted. This requirement applies to all 401k plans for as long as assets remain in the plan. To stay up-to-date on any changes you may review the Notice 2013-84. To avoid any mistakes moving forward consider using a calendar noting when changes must be complete. Review your document annually and always keep constant contact with the company that sold you the plan.

  1. Do the plan’s operations adequately follow the terms of the plan?

Failure to comply with the plan’s terms is the most common mistake revealed during an audit. The most important thing to remember here is that although the employer is responsible for keeping the plan in compliance there may actually be many others servicing your plan. If that is the case, everyone should be aware of any changes made to your plan, whether that is modifications to how you operate your plan or changes made to plan trustees. Developing a communication plan can help keep all fiduciary partners reliable.

  1. Do you use the proper definition of compensation for all deferrals and allocations?

You may use different definitions of compensation for different purposes so it is important that you use the proper definition for deferrals, allocations and testing. According to the IRS, a plan’s compensation definition must satisfy rules for determining the amount of contributions. One such rule is that the amount of compensation under the plan can’t exceed $260,000 in 2014 (subject to cost-of-living adjustments in later years.) The best practice to ensure definitions are followed is to perform an annual review of compensation definitions and also make sure whomever is in charge or determining compensation is properly trained, and that align with your own providers definitions.

  1. Were terms followed with regards to employer matching contributions?

Make sure that what you say you will do, you do. Review the plan document to determine the employee eligibility requirements and matching contribution formula and make sure that is congruent with operations. If need be, contact your plan administrators to ensure they have adequate payroll records to make the proper calculations.

  1. Could your plan pass the Actual Deferral Percentage/Actual Contribution Percentage nondiscrimination tests?

Every 401k plan, with the exception of certain auto enrollment and 401k safe harbor plans, must satisfy the annual ADP/AFC nondiscrimination tests. These tests ensure that contributions for less highly compensated employees are proportional to contributions made for owners and managers (highly compensated employees). For more information on what these tests actually determine, see page 25 of this 401k Plan Guide provided by the IRS. Make sure you are communicating with plan administrators about proper employee classifications to stay compliant with plan terms. In most cases, to avoid testing, you may consider a safe harbor or auto enrollment plan.

  1. Did you mistakenly exclude an eligible employee from making a deferral?

In the case of elective deferrals, don’t assume you know who is eligible and not. Rather, treat each employee who receives a W-2 as eligible unless determined otherwise by plan terms. If you do make this mistake; however, make a qualified non-elective contribution in order to compensate employees for the missed deferral opportunity. To avoid this, monitor census information and apply participation requirements.

  1. Are elective deferrals limited to the amount specified under IRC 402(g) for the calendar year?

IRC 402(g) indicates limits for elective deferrals plan participants can exclude from taxable income in a calendar year. This limit under section 402(g) is $17,500 for 2014. Make sure to inspect deferral amounts of plan participants to ensure deferral limits aren’t exceeded. Failure to distribute deferrals in excess of the limit may result in additional taxes and penalties for both the employer and participant.

  1. Are employee elective deferrals deposited in a timely manner?

Make sure you know the earliest date you can segregate deferrals from general assets and compare that date with the actual deposit date to ensure you don’t miss a deadline. If you miss the deadline for contributing participant deferrals to the plan trust you may have to pay an excise tax – determined by the amount involved in the transaction. The initial tax is 15 percent on the amount involved, but if the transaction goes unpaid an additional tax of 100 percent of the amount may be due. As soon as you can deposit deferrals you should, and in no event should the deposit be later than the 15th business day of the following month, or 7 business days after payroll for plans with less than 100 participants.

  1. Do participant loans conform to the requirements of the plan and IRC Section 72(p)?

Many 401k plans permit loans to participants. Before allowing participants to borrow money from the plan, be sure your plan document allows for this type of transaction. Be sure to review the plan document and all outstanding loans to ensure employees are repaying their loans in a timely manner. Make sure you have procedures in place to prevent loans that are prohibited transactions and ensure plan provisions on loans are being followed. Violations may be treated as taxable distribution to the participant. Also, ensure your plan document explains who is responsible for collecting delinquent loan payments.

  1. Were plan terms followed with regards to hardship distributions?

Because life happens, a 401k plan may allow employees to receive hardship distribution due to immediate financial need. According to law, a hardship distribution may be made because of:

  • Medical care expenses incurred by the employee, employee’s spouse or dependents;
  • costs directly related to the purchase of a principal residence (excluding mortgage payments);
  • payment of tuition, related educational fees and room and board expenses for the next 12 months of post-secondary education for the employee, employee’s spouse, children or dependents ;
  • payments necessary to prevent eviction from an employee’s residence or foreclosure on that residence;
  • funeral expenses and
  • certain expenses relating to the repair of damage to an employee’s residence.

Be sure you are constantly amending the plan to allow for hardship distributions and make sure you understand the provisions aligned in the plan document and follow them through in operation.

If you can answer no to any of the questions above your 401k plan may not be in compliance. Granted this list is only a guideline to a more compliant plan, just because you answered yes to all these questions does not automatically make your plan 100 percent compliant. For complete ease of mind, be sure to contact your advisor.



Author Bio: As a Human Resource Professional with over 20 years of experience, Jenny has extensive experience in management, mentoring, policy development and recruiting. Jenny's team player mentality and leadership abilities make her an elite HR Director who is always on top of the latest HR trends. She relentlessly directs associates and executives to achieve their maximum potential for both themselves and their companies.

training-and-schooling-your-workforce-ii

5 Reasons to School Your Workforce

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5 Reasons to School Your Workforce

Learning management systems (LMS) have become even more popular in the corporate workplace, and it’s not without good reason: They work.

In recent years, employees have become all too familiar with cumbersome or outdated training methods. According to Gallup, only 32 percent of U.S. employees are engaged in their work. The same study cites outdated training methods as one of the biggest reasons for disengagement. It’s not too late to upgrade to an easy-to-use training program that will engage your employees by keeping them up to speed on the latest organizational developments.

In addition to having more direct training options at your disposal, you are investing in an immediate way connect with an entirely new generation of employees. Seventy-five percent of millennial workers are eager to utilize online learning, which means now is the time to start thinking of innovative ways for workplace engagement. Online LMS technology allows employers to train their employees on anything, including new government regulations, through new media such as web videos, podcasts and interactive slides.

Why upgrade to a learning management system?

  • It’s instant.

Learning management systems give trainers and managers the means to quickly upload quick videos or PowerPoints for employees instantly. Once the upload is complete, the tools and trainings your employees need for their next steps are already at their fingertips. The time between building the training session and completion of the assignment is shortened to mere minutes.

  • It’s simple.

An LMS gives you the quick and intuitive tools needed to immediately train employees. Building a training session is as simple as pulling out your phone and recording a two-minute video before uploading and assigning it to your employees. Once you have approved the material, they will have immediate access to these trainings after logging into their employee self-service page from anywhere with an internet connection.

  • It helps your organization mitigate compliance risks.

We live in a work climate in which compliance regulations are in a constant state of ebb and flow. Many workers are required to receive mandatory training in areas such as health and safety, diversity, anti-harassment and bullying. Compliance training often requires a lot of box-ticking, and delivering this kind of instruction via traditional methods can be highly labor-intensive. With the recent FLSA overtime expansion ruling, you may need to educate your management staff quickly on what the new rule means for your company and what actions your company plans to take to aid their compliance efforts. Whatever the case may be, you need to have all of your employees on the same page, and an LMS provides the communication vehicle you need to add these new compliance standards to your online courses in minutes, all while giving you the ability to track and report on who has completed the training.

  • It’s flexible.

An LMS provides a number of options that employees can access in a direct and organized manner at any time. Thanks to the streamlined workflow and flexibility in the variety of content supported, you can upload videos, podcasts and other interactive content for employee training with ease.

  • It’s accessible everywhere.

One of the biggest benefits of an LMS is the accessibility it offers to employees; anywhere an internet connection is available. Your employees can access and share expertise at any time through their desktop or even on the go. To keep the training as simple and easy to access as possible, all of the courses are available in a single online location.

Here’s the good news. The process of utilizing Paycom’s LMS is quicker and less challenging than you might think. Activating Paycom Learning is not only going to help keep you up to date on compliance standards, but will switch you to a forward-thinking training program to further engage your employees.

It’s not too late to take that next step and join the future of instant e-learning. If you have struggled to keep your workforce engaged or are looking for a faster, more effective way to convey new requirements to your people, Paycom Learning is here to help, just in the nick of time.

 

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.


Holly Faurot

by Holly Faurot


Author Bio: Faurot, vice president of client relations, has served in a number of roles during her tenure at Paycom, including regional vice president, sales training manager and sales consultant. A born leader and a 2012 honoree in Oklahoma’s 30 Under 30 awards, she has helped a number of individuals and clients achieve success through her energetic spirit. The product of a dairy farm in Kenefic, Okla., Faurot was taught at a young age the importance of working hard, being honest and having a desire to help others.

The Elephant and Donkey in the Office

The Elephant and Donkey in the Office

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Policies on Political Activities at Work

The 2016 race for the White House has been intense, with candidates engaging in heated debates. As might be expected, the charged electoral atmosphere has permeated the workplace, causing record level divisiveness. According to the Society for Human Resource Management (SHRM), “over one-quarter of employees reported greater political volatility at their workplace in 2016 compared to previous election years.”

Political discussions easily can turn into arguments because people often view their political beliefs as part of their identity. To prevent political conflicts – which can negatively impact productivity and morale – many employers discourage political activities in the workplace.

First Amendment and the Public Sector vs. Private Sector

Public employees are governed by the First Amendment of the U.S. Constitution, which gives them rights to free speech in the workplace, though with some restrictions. But, contrary to popular belief, the First Amendment does not apply to the private sector and does not bar private employers from restricting employees’ political speech. With few exceptions, private employers can prohibit employees from engaging in political discussions at work.

Employers should examine state law, which may provide employee protections. For example, some states have off-duty conduct, free speech and political activity laws that give employees rights not offered under federal law. In addition, Section 7 of the National Labor Relations Act (NLRA) allows unionized and non-unionized employees to engage in protected political advocacy, as long as it relates to labor and working conditions.

Employers who permit political discussions at work should be careful that such conversations do not violate legally protected characteristics, such as race, age, gender, disability and religion – which could prompt complaints of harassment and discrimination from offended employees.

Can employers tell employees not to display political signs in their work space?

Private employers can tell employees not to post campaign signs in their cubicles and require they remove political signs from their work space – as long as they don’t breach applicable state laws or protected Section 7 NLRA rights.

How can employers address political activities at work?

If your organization does not have a policy on political activities, consider speaking with your attorney to determine whether it needs one. If you do have a policy in place, consider reviewing for compliance with applicable laws. Does the policy cover relevant areas, such as displaying political buttons on work clothing, making campaign calls on lunch breaks and using office equipment for political activities? Organizations that allow employees to talk about politics at work should aim for a policy that minimizes distractions and encourages respectful political discussions.


craymond

by Chad Raymond


Author Bio: With over 19 years of experience in employee engagement, benefits administration and government compliance, Chad has unparalleled knowledge in the fields of leadership and human resources. Chad has worked in several different capacities with Paycom including leading our product development team and HCM initiatives as well as the former director of Paycom’s service department. Chad’s vision and execution helped empower executives and their teams to reach their full potential, ultimately leading to his new role as Paycom’s vice president of HR.

4-ways-to-make-ees

4 Ways to Make Your Employees Want to Come to Work

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How to Make Your Employees Want to Come to Work

Disengaged employees don’t feel motivated to work. A 2015 survey by Gallup revealed that 50.8 percent of American workers were not engaged in their jobs. Consequently, disengaged employees may arrive to work late, miss deadlines, submit poor-quality work, alienate themselves from co-workers or seek employment elsewhere.

While the employee could be solely responsible for his or her lack of motivation, in some cases, disengaged employees have a need that’s not being met by their employer. By recognizing and fulfilling this need, you can inspire them to arrive and perform up to standard. Here are four ways to accomplish this.

1. Offer challenging work that makes use of employees’ talents

According to a 2015 global survey by Right Management, 25 percent of employees reported that their top motivation for job change is to experience a different work culture with more challenging assignments. Stimulating projects make the work process more interesting,and push employees to keep learning and unlock hidden potential.

2. Provide transparent opportunities for advancement

High performers want to know that their career is progressing and that they will be given a fair chance at promotions. In a 2015 survey by Mercer, 26 percent of employees said their company does not make it easy to understand advancement opportunities within the company. 78 percent would stay longer with their current employer if their career path with the organization was clearly understood. To retain A-list workers, it’s important to develop and communicate advancement policies clearly.

3. Recognize and reward your employees

Near the top of Abraham Maslow’s hierarchy of needs is esteem, which precedes only self-actualization.

Maslow's Hierarchy of Needs

In the workplace, esteem deals with employees’ beliefs that they’re doing great work and that they should be recognized and rewarded for their efforts. Employees who are not compensated fairly or recognized for their hard work tend to move to greener pastures. According to a 2015 PayScale report, 65 percent of workers are quitting for more money. Studies also show that companies with strategic recognition programs have a lower turnover rate than those without a recognition program.

4. Get to know your staff

Getting to know your employees on a professional and personal level indicates that you value them not only as workers but also as individuals. The payoff is an employee-manager rapport that lends deeper insight into your employees’ motivations. You might learn:

  • Whether they like working for the company
  • Their personal likes and dislikes
  • How they feel about their manager and coworkers
  • Whether they enjoy their work
  • What projects they’re most suited for
  • Whether they’re satisfied with the equipment or technology they’re using
  • What resources they need to improve their performance
  • Their preferred working style, such as independently or in a team
  • Whether their personal life is interfering with their work
  • What exactly is demotivating them at work
  • What you can do to help

 

Disengaged employees are prone to being “no-shows,” which means someone else has to pick up the slack. A flight risk, they’re not above jumping ship without warning, which stunts organizational growth. While employees should be self-motivated, employers should also do their part by providing meaningful work, competitive pay, recognition, chances for advancement and a healthy work environment that fosters positive relationships.

 

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.



Author Bio: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attuned to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

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