Employee benefit plan administration is a complex responsibility, and even small oversights can lead to serious consequences. Many organizations choose to work with a Third-Party Administrator (TPA) to help manage this complexity, and for good reason. In 2024, the U.S. Department of Labor’s Employee Benefits Security Administration recovered nearly 1.4 billion dollars for benefit plans and their participants. Much of this recovery resulted from correcting common administrative errors, resolving participant complaints, and addressing compliance failures uncovered during investigations. These issues often involved late contributions, inaccurate records, missing documentation, or other operational mistakes that required financial correction. Despite these ongoing problems, many plan sponsors continue to manage their plans internally, which can increase the likelihood of errors that lead to penalties, added workload, and unnecessary compliance risks.
Below are some of the most common mistakes that Amalgamated Employee Benefits Administrators (Amalgamated) have seen when plans are not managed with consistent oversight and technical expertise:
Not Updating the Written Plan Document
A written plan document is the foundational legal document that governs how an employee benefit plan operates. It outlines the plan’s rules, eligibility criteria, contribution formulas, benefit calculations, fiduciary responsibilities, administrative procedures, and any other provisions required under ERISA and the Internal Revenue Code. Every benefit plan is required to have a formal written document, and plan sponsors must follow it exactly.
Because laws and regulations change over time, this document must be updated regularly to stay compliant. When updates are missed, the plan can fall out of alignment with IRS and Department of Labor requirements. Outdated documents also create confusion for both administrators and participants and increase the chance of inconsistencies between what the plan says and how it actually operates. This can lead to operational errors, corrective actions, or penalties that could have been avoided with timely updates.
Delays in Depositing Employee Contributions
Employee contributions must be deposited as soon as it is reasonably possible to do so. The Department of Labor expects employers to move these funds promptly based on their normal payroll practices. Late deposits may require restoring lost investment earnings and other corrective steps.
Incorrect or Late Employer Contributions
Matching and profit-sharing contributions must be calculated correctly and deposited on time. If the plan document does not specify timing, IRS deadlines apply. Errors or delays can create participant inequities and may require adjustments to bring the plan back into compliance.
Missing Required Plan Documents and Summary Plan Descriptions
ERISA requires plan sponsors to maintain formal plan documents and provide a summary plan description to participants. Failure to maintain or distribute these documents can lead to penalties. If a participant requests information and it is not provided on time, daily fines may apply.
Not Operating the Plan According to Its Terms
Administrative issues often occur when the plan is not operated according to its written rules. This may include using incorrect definitions of compensation, misapplying eligibility rules, or miscalculating contributions. Even small deviations can create compliance gaps and require correction.
Errors in Eligibility and Worker Classification
Misclassifying employees or failing to track temporary or part-time staff can lead to incorrect eligibility decisions. Covering ineligible individuals or excluding eligible ones creates financial and compliance risks and often requires corrective action.
Reducing Risk and Strengthening Plan Administration with Amalgamated
Mistakes in plan administration can lead to financial penalties, unnecessary administrative burden, and even legal exposure. Amalgamated helps plan sponsors minimize these risks by providing knowledgeable administration, accurate recordkeeping, and proactive compliance oversight. Our team brings the experience, systems, and attention to detail needed to keep benefit plans running smoothly and in alignment with regulatory requirements. By partnering with Amalgamated, organizations gain confidence that their plan is being administered correctly and consistently.
If you want to learn more about how Amalgamated can help your organization avoid costly plan administration mistakes, contact us today.
