Many small business owners give little thought to their
company's 401(k) plans. Often, employers use third party
administrators to administer the plan, and once it is in place,
they forget about it. This can be a costly mistake.
Here are five of the most common mistakes small business owners
1. Failure to deposit contributions on time.
This mistake has the potential to be a double whammy, because
the employer will hear from both the IRS and the Department of
Labor. Employers must deposit amounts withheld from an employee
"as soon as it's administratively possible to segregate
the funds." For most, this is a matter of days. Correcting
this failure will include paying interest on the late
2. Failure to properly include employees as participants.
The plan spells out when employees become eligible to
participate, but entry dates can be confusing and employers need to
review them for new employees to ensure they are able to
participate in a timely manner. The employer will be required to
make up contributions the employee was unable to make because they
weren't properly included.
3. Failure to properly follow an employee's deferral
With a 401(k) plan, employers must allow employees to make an
election to defer a portion of their income into the plan. If this
election is not timely made or, if it is not correctly followed,
the employer is responsible for making up missed deferrals.
4. Failure to obtain spousal consent of plan distributions.
Some plans require that the distribution be in the form of a
Qualified Joint and Survivor Annuity (QJSA) unless the
participant's spouse consents to an alternative form of
distribution. This requirement can be overlooked if the participant
is single but subsequently marries. Failure to obtain necessary
consent can result in the employer being required to pay benefits
5. Loan provision mistakes.
Many 401(k) plans allow participants to borrow from the amounts
they deferred into the plan. Rules regarding plan loans are precise
as to how much can be borrowed and the length of time a loan can be
outstanding. Employers often run into problems when participants
request multiple loans. Correction of this mistake may require the
participant to take a premature distribution thereby incurring a
The discovery of these errors can potentially lead to
disqualification of the plan. Such a draconian solution is a last
resort and the IRS has correction procedures, but the price can
include costly penalties. Therefore, periodic operational audits
are recommended, either by the employer or an outside advisor. Such
audits may save the employer unnecessary time and expense.
Employment relationships in the United Arab Emirates are governed by Federal Law No.8 of 1980 Regulating Labour Relations as amended by Federal Laws No.24 of 1981, No.15 of 1985 and No.12 of 1986 (the Labour Law).
As the name implies, end of service gratuity is an amount of money that every employee is entitled to receive, and every employer is liable to pay, upon termination of an employment relationship in the UAE, provided that the employee meets the conditions set out in the Labour Law (UAE Federal Law No.8 of 1980).