The most common employee benefits mistakes share a pattern: the underlying rule was more specific than the employer realized. The consequences – penalties, retroactive contributions, plan disqualification – follow from that gap, not from bad intent.
Two areas generate the most preventable cost.
The Deposit Timing Rule
The Department of Labor requires employee salary deferrals to be deposited into a qualified retirement plan as soon as they can reasonably be segregated from employer assets. The 15th business day of the following month is the hard outer limit – not the standard.
Many employers treat the outer limit as the target. For small plans with fewer than 100 participants, there is a cleaner path: deposits made within seven business days of the paycheck automatically satisfy a safe harbor. Employers depositing on day 14 every cycle are technically compliant but operating at the edge of a rule designed to require faster action.
Late deposits trigger DOL and IRS penalties and retroactive earnings requirements. Most employers who get caught here were not trying to cut corners – they simply misread which deadline applied to them.
The SPD Gap
ERISA requires a written plan document and a Summary Plan Description that meets specific content standards. Most employers rely on carrier-provided booklets to satisfy both. Those booklets frequently do not qualify.
Failing to provide an SPD within 30 days of a participant request carries a penalty of up to $110 per day. More practically, an outdated SPD can become the document a court enforces in a benefits dispute – regardless of what the actual plan document says. The carrier booklet feels like a solution because it looks like one. It often isn’t.
A wrap document fills the gap. It supplements what the carrier provides to meet what ERISA actually requires, and it can cover multiple plans under one instrument. It is a low-cost fix to a compliance obligation that generates real liability when ignored.
The Common Thread
These are not obscure rules. They are well-documented requirements that create problems when employers assume the simpler version applies. Active engagement with the actual plan documents – not annual enrollment processing – is what keeps these exposures from becoming claims.
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