401(k) retirement plans can help you maintain your desired standard of living during retirement. While you trust plan administrators to properly manage these funds, mistakes can be made. It is important to be aware of the most common errors and the actions you can take to protect your rights to these benefits.
Six Common 401(k) Mistakes
401(k) benefits provide you with future financial security. Benefit plan administrators have a fiduciary duty to manage these accounts wisely and in a way that protects your best interests. Unfortunately, mistakes are commonplace. According to the Internal Revenue Service (IRS), among the most common types of errors concerning 401(k) accounts include:
- Accidentally excluding you from coverage under the 401(k): This can result from either wrongly classifying you as a non-eligible employee or failing to update your plan information.
- Failing to make the appropriate deferrals: Not deferring the right amount of income into your 401(k) is one of the most common administrative mistakes.
- Failing to make matching contributions: Another common error, overlooking matching contributions could deprive you of significant amounts of money.
- Failing to update plans to reflect recent changes in laws. It is the plan administrator’s job to update your 401(k) periodically to reflect changes in tax laws. When they fail to do so, they can face heavy fines and other penalties as a result.
- Engaging in discriminatory behavior: 401(k) plans must undergo different types of tests periodically to ensure they are not engaging in discriminatory behavior, such as making a greater percentage of contributions to the plans of high-level employees.
- Overpaying on retirement benefits: One of the most serious types of errors and among the hardest to address, overpayments could leave you owing large sums of money to the plan.
Protecting Yourself Against 401(k) Errors
Plan administrators can be held liable for mistakes made with your 401(k) plan. The following steps can help to protect you by alerting you to issues when they occur:
- Take the time to carefully read any correspondence you receive from the plan administrator;
- Always confirm any changes you make in your plan or in your deferments;
- Keep your paystubs and check regularly to ensure your account balance matches your contributions.
- Follow the specified plan procedures if you suspect a mistake was made.
Procedures for resolving problems can be found in your plan documents under the summary plan description. The Employee Retirement Income Security Act of 1974 (ERISA) requires your employer to provide these documents to you, free of charge.
Contact Our Chicago Retirement Claims Attorney
When it comes to your retirement benefits, the Law Offices of Michael Bartolic helps to ensure you are protected. To discuss your concerns, contact our Chicago retirement claims attorney and request a consultation today.