Q: What compliance tasks does Betterment handle on behalf of the plan sponsor?
A: Some of the key functions Betterment handles include:
For a complete list, please review our 401(k) administrative services terms.
Q: When are employee contributions required to be deposited?
A: DOL regulations require that employee deferrals and loan repayments be deposited into the plan as soon as administratively feasible, generally interpreted as within 7 business days for small plans. Late deposits are a compliance violation and can result in penalties. By integrating with your clients’ payroll provider, we’re able to automate contribution flows and help reduce the risk of late deposits.
Q: What happens if a plan fails nondiscrimination testing?
A: The most common correction for a failed ADP/ACP test is refunding contributions to HCEs in the amount necessary to pass. Refunds must be made within 2.5 months of year-end to avoid a 10% excise tax (by March 15). Alternatively, plans can make a QNEC contribution to NHCEs to correct the failure. Safe Harbor plans generally sidestep this issue entirely.
Q: What is the ERISA fidelity bond requirement?
A: Plan officials who "handle" plan funds must be covered by an ERISA fidelity bond — a form of insurance protecting the plan against fraud or dishonesty. The bond must cover at least 10% of funds handled, with a $500,000 cap ($1,000,000 for plans holding employer stock). Solo 401(k) plans are not subject to ERISA Title I requirements such as an ERISA Fidelity Bond..