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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.

Veterans

8 Ways Veterans Improve Your Workforce

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Is your recruiting team actively seeking veterans to fill your open positions? If not, you could be missing out on an unbeatable combination of skills and experience. Not only are military personnel often cross-trained in a variety of useful skills, but they also have invaluable experience that can benefit your organization. The available Work Opportunity Tax Credit even provides a federal tax incentive for companies that hire eligible veterans.

I know firsthand the value that veterans can bring to a business. We are grateful for the servicewomen and servicemen who work for Paycom, for both their service to our country and the talents they bring to our corporation.

Recently, I sat with a roomful of Paycom employees who are also veterans. I spoke with linguists, a combat medic and a radar technician representing the U.S. Air Force, Marine Corps and the Army National Guard.

I asked these veterans to share which elements of their service they are most proud to carry into their civilian work. Here’s some of what they shared with me.

  1. Punctuality

The military is no-nonsense when it comes to respecting others’ time. If you’re early, you’re on time. If you’re on time, you’re late. And if you’re late, you’re in trouble.

  1. Getting the most out of limited resources

Maximizing the use of available resources is a key skill. Veterans know how to get more done with less, because there’s no guarantee that you’ll have everything you could possibly need in a crisis situation.

  1. Adaptability

Important lessons are learned in the field – and not just during training. It’s crucial for an individual to be flexible enough to take new information and apply it to future situations.

  1. Great listening skills

A linguist in our group noted that active listening was an especially important skill in the field. Active listening can improve communication and ensure that projects are completed as expected the first time.

  1. Attention to detail

Being able to reliably pay attention to small but critical details is essential for success in the military. This ability translates into any number of civilian jobs.

  1. Being organized

Our veterans noted that you really don’t have the option of being disorganized in the military – which means that veterans know how to get and stay organized.

  1. Problem-solving

As one veteran shared, “In Afghanistan, our mission was something like 90% boredom and 10% sheer terror. So in that 10% time of sheer terror, you have to be able to fix a problem in a very short period of time.”

In times of chaos, quick decision-making carries the day. This problem-solving ability serves veterans well once they’re back in civilian life, too.

  1. Teamwork

Military personnel work with people from all walks of life and all skill levels. Being easy to work with in diverse groups helps everyone do their jobs better. Veterans know that success depends on an entire team working together to achieve results.

These capable men and women can bring a wide variety of skills that can improve any work environment, and they’ve certainly contributed a lot to ours.

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Posted in Blog, Featured, Leadership, Talent Acquisition, Talent Management

Jim Quillen

by Jim Quillen


Author Bio: As director of tax at Paycom, Jim Quillen is responsible for ensuring payments and returns are filed timely and accurately. Quillen, a CPA by training, has worked in many fields during his career, including finance, auditing, recruiting, sales, business development and software implementation. Prior to his current role, Quillen has served Paycom as the director of business intelligence, director of new client implementation and director of recruiting.

applicants’ criminal history

California ‘Ban the Box’ Law to Take Effect Jan. 1

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Last month, California Gov. Jerry Brown signed Assembly Bill 1008 (AB 1008), placing new restrictions on employers’ ability to make hiring decisions based on applicants’ criminal history. Effective Jan. 1, 2018, AB 1008 also limits when employers may ask applicant about that history.

Prior to this legislation, “ban the box” protections only prohibited state and local agencies from asking about conviction information before the applicant was determined qualified for the position. The new law extends the protections to all applicants applying to an employer in California with five or more employees.

Under AB 1008, consideration of an applicant’s criminal history is permissible only after the employer has made a conditional offer of employment. At that point, employers may not rescind the employment offer based on the criminal history until they have performed an individualized assessment.

Individualized assessments of an applicants’ criminal history

An individualized assessment is a process to justify denying an applicant a position by linking their criminal history to specific job duties. For example, if an employer is considering an individual for a cashier position, which would involve handling large sums of cash, the employer may determine a shoplifting conviction to be reason for disqualifying, because the conviction relates to specific job duties.

An individual assessment must consider:

  • the nature and gravity of the offense and conduct
  • the time passed since the offense or conduct and completion of the sentence
  • the nature of the job held or sought

Also, the employer must notify the applicant in writing once a preliminary decision is made. This notice is not required to contain a justification for the preliminary decision, but the employer must:

  • provide written notice of the disqualifying conviction or convictions that are the basis for the preliminary decision to rescind the offer
  • include a copy of the conviction history report, if any
  • let the applicant know they have the right to respond to the notice within at least five business days
  • explain the candidate may submit evidence challenging the accuracy of the conviction record or present mitigating circumstances

During that five-day period, the employer cannot make any final hiring determinations based on conviction records. If the applicant responds, the employer must consider the information in the response before making a final decision.

California employers

AB 1008 contains a detailed process for California employers to follow when making employment decisions based on criminal history. Employers should review these changes and adjust policies and procedures accordingly to ensure compliance by Jan. 1, 2018.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

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Posted in Blog, California, Compliance, Featured

Jason Hines

by Jason Hines


Author Bio: Jason Hines is a Paycom compliance attorney. With more than five years’ experience in the legal field, he monitors developments in human resource laws, rules and regulations to ensure any changes are promptly updated in Paycom’s system for our clients. Previously, he was an attorney at the Oklahoma City law firm Elias, Books, Brown & Nelson. Hines earned a bachelor’s degree from the University of Central Oklahoma and his juris doctor degree from the Oklahoma City University School of Law, where he graduated cum laude. A fan of the Oklahoma City Thunder, Hines also enjoys exploring the great outdoors with his wife and daughter.

How The Fred Factor Can Transform Your Customer Service

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In 1982, leadership expert and motivational speaker Mark Sanborn moved into a neighborhood where his view of customer service was transformed. In his first internationally best-selling book, The Fred Factor: How Passion in Your Work and Life Can Turn the Ordinary into the Extraordinary, he tells the story of a postman who revolutionized the way he looked at customer service and the idea of “going above and beyond.”

Sanborn had just moved into a new home in the Washington Park area of Denver when Fred, a seemingly ordinary United States Postal Service carrier with a small, thin mustache, introduced himself one day during his route. However, Fred was no ordinary mailman.

As Sanborn came to discover, Fred was the kind of worker who exemplified everything “right” with customer service. He was “a gold-plated example of what personalized service looks like and a role model for anyone who wants to make a difference in his or her work.”

Join us as Mark Sanborn, provides the answer through four powerful tools that business leaders and HR professionals can use to help others pursue their potential, which in turn, helps improve engagement and a company’s bottom line during our free Nov. 16 webinar.

In The Fred Factor, Sanborn describes how each of us can become a “Fred.”

What makes someone a ’Fred’?

A “Fred” is someone who goes above and beyond the normal call of duty, regardless of recognition or reward. And that’s the key part: regardless of recognition or reward. These employees demonstrate a spirit of service, innovation and commitment. This “Fred Factor” will help you at work and in your personal life.

Here are four principles from the book that can help you become a Fred.

  1. Everyone makes a difference

No matter your position, ultimately it’s up to you to do your job in an extraordinary way. There are no unimportant jobs, just people who feel unimportant doing them. More satisfaction exists in being a first-rate truck driver than a tenth-rate executive.

Martin Luther King Jr. said, “If a man is called to be a street sweeper, he should sweep the streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep the streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.’”

Think about the ways this applies to you and your job, and remember: What you do every day matters and has an effect on others.

  1. Success is built on relationships

Indifferent people provide indifferent service. Building strong relationships with your colleagues will help you work better together and provide an even higher level of customer service.

You can improve the service you provide by getting to know your customers better, too. Service becomes personalized when a relationship exists between the provider and the customer. For example, think about your hairdresser or barber: Would the hair-care experience be a good one if the two of you weren’t on friendly terms? Would you be willing to spend hours with this person every other month or so if he or she wasn’t personable? Probably not.

What can you do to build relationships with the people you work with, including the customers you frequently serve?

  1. Continually create value

Creating value doesn’t have to cost a thing. Ever feel like you don’t have enough money, training or other resources to perform at a high level? Fred had only a uniform and a bag of mail, and still he managed to provide exceptional customer service. His own creativity and drive helped him succeed, and it didn’t cost him or the company a single penny.

Your imagination and creativity can help you go above and beyond too! If all Fred needed was a bag of mail and a uniform, think of everything you can accomplish with the resources you have at your fingertips.

You can be an employee who gives your company a competitive advantage by creating value for your clients and colleagues. Want to bet that will help you in your professional life?

  1. Reinvent yourself regularly

Most of us fall short of what we are capable of accomplishing. If you want to reach your full potential, mediocrity is your silent opponent. Doing just enough to get by means you’ll never know how much you could accomplish.

Think of the effort and originality Fred brought to delivering the mail. If he could bring such value to putting letters in a box, how much more can you bring to your position? Just getting by won’t help you reach your goals; pursuing innovation and creativity can help you gain real value and meaning from your work.

No matter your position or circumstances, you get to start with a clean slate every day. You can orient your professional (and personal) life any direction you choose!

The way to move through life joyfully is by focusing on what you give rather than what you get. You do the right thing not because you have to, but because it’s right. All work is honorable; always do your best, because someone is watching. This is the “Fred Factor”!

After putting these ideas to practice, you may wonder, “What’s next?” If you want to make sure you’re reaching your full potential (even after achieving your goals), join us for our live webinar Nov. 16, when Sanborn provides the answer through four powerful tools that business leaders and HR professionals can use. Register for free here.

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Posted in Blog, Employee Experience, Featured, Leadership

Chelsea Justice

by Chelsea Justice


Author Bio: Chelsea is co-host Paycom’s HR Break Room podcast, editor-in-chief of its corporate culture magazine, Paycom Pulse and is Paycom’s communications supervisor. During her more than eight years in marketing, corporate training and communications, she has created hundreds of magazines, training guides, videos and webinars for multiple industries. In her free time, Chelsea is planning her next travel adventure, perfecting her most recent baking recipe, devouring a good book and, above all, spending time with family.

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