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Avoiding Compliance Pitfalls: What Home Care Employers Need to Know About Retirement Plan Rules

The Situation Report | August 4, 2025

By Risk Strategies

Retirement plans are a valuable benefit for attracting and retaining top talent in the competitive home care industry. However, with that privilege comes the responsibility of adhering to a complex web of regulations set by the Employee Retirement Income Security Act (ERISA), the Department of Labor (DOL), and the Internal Revenue Service (IRS). Non-compliance can result in hefty fines, audits, and strained employee relations.

This article uncovers common compliance pitfalls in retirement plan administration and provides actionable strategies to maintain compliance, protect your employees, and safeguard your business.

Common Compliance Pitfalls

Navigating the complexities of retirement plan compliance can be challenging, even for diligent employers. Understanding these common pitfalls—and their potential impact—is the first step toward safeguarding your plan and your business.

1. Late Contributions

ERISA mandates that employee contributions to retirement plans must be deposited as soon as they can reasonably be segregated from the employer’s general assets. For many businesses, this means contributions should be deposited within a few business days after payroll.

  • Pitfall Example: A home care agency, stretched thin on administrative resources, delays depositing employee contributions, leaving funds in the company account for weeks. This delay violates ERISA rules and may trigger penalties or interest payments to employees.
  • Why It Matters: Late contributions erode trust with employees and draw increased scrutiny from the DOL.

2. Improper Documentation

Retirement plans require meticulous record-keeping. Missing or incomplete records for participant elections, plan amendments, or beneficiary designations can create significant liabilities.

  • Pitfall Example: An employer fails to update the summary plan description (SPD) after plan amendments, leaving employees in the dark about their rights and benefits.
  • Why It Matters: Documentation gaps can result in compliance violations, particularly during audits, and complicate plan management.

3. Failure to Conduct Regular Plan Audits

Annual audits are vital for plans with 100 or more participants and can uncover issues like misaligned investments, excessive fees, or operational errors.

  • Pitfall Example: A home care agency neglects to conduct an audit, resulting in unchecked procedural errors in calculating employee contributions and matching funds.
  • Why It Matters: Failing to audit a plan leaves errors unnoticed and risks compounding compliance failures.

4. Mismanagement of Loans and Distributions

Retirement plans that allow for loans or hardship withdrawals require strict adherence to IRS rules. Improper handling—such as approving loans without proper documentation or exceeding limits—can lead to penalties.

  • Pitfall Example: An employer improperly approves a hardship withdrawal for a non-qualifying event, resulting in fines and a tax liability for the employee.
  • Why It Matters: Mismanagement of loans or withdrawals undermines the plan’s operational integrity and may subject it to disqualification.

5. Failure to Monitor Service Providers

Employers have fiduciary responsibilities to select and monitor third-party service providers, including recordkeepers and investment advisors. Neglecting oversight can lead to excessive fees or poor investment performance.

  • Pitfall Example: An agency renews a recordkeeping contract without benchmarking fees against industry standards, leading to higher-than-average costs for participants.
  • Why It Matters: Employers remain legally accountable for ensuring service providers act in the best interests of plan participants.

6. Outdated Policies and Procedures

Staying compliant means keeping retirement plans updated to reflect regulatory changes, plan amendments, and emerging best practices.

  • Pitfall Example: An employer fails to adapt their plan to reflect updated IRS contribution limits, causing discrepancies in payroll contributions.
  • Why It Matters: Outdated policies expose employers to IRS penalties and employee dissatisfaction.

Actionable Steps for Ensuring Compliance

Proactive planning is key to avoiding compliance pitfalls and protecting both your employees and your business. By implementing these strategic steps, home care employers can ensure their retirement plans not only meet regulatory standards but also deliver long-term value.

1. Partner with Experienced Advisors

Work with qualified advisors who specialize in retirement plan administration and compliance. Advisors can guide you through complex regulations, identify weaknesses in your plan, and recommend tailored solutions.

2. Conduct Regular Compliance Reviews

Schedule annual reviews of plan operations, documentation, and service provider contracts to identify and correct compliance gaps before they escalate. Include the following:

  • Audit contribution timing and amounts
  • Ensure SPDs, plan documents, and amendments are current
  • Review plan fees and benchmark them against industry standards

3. Maintain Comprehensive Documentation

Ensure all plan-related documents are up to date, easily accessible, and properly organized. Consider using a secure digital platform to archive and manage your documentation for quick access during audits. Documents include:

  • Plan documents and amendments
  • Summary plan descriptions (SPDs)
  • Beneficiary designations
  • Investment policy statements

4. Train Plan Administrators

Equip your HR and benefits team with the knowledge and tools they need to manage the retirement plan effectively. Training should cover:

  • Contribution deadlines
  • Loan and distribution policies
  • Documentation requirements
  • Regulatory updates

5. Monitor Legislative and Regulatory Updates

Stay informed on new IRS, DOL, and ERISA requirements. For example, recent legislation such as increases in contribution limits or updates to fiduciary standards could impact your plan. Consider subscribing to regulatory bulletins or work with an advisor who provides regular compliance updates.

6. Benchmark Fees and Performance

Compare service provider fees and investment performance against industry benchmarks at least every three years, or more often if significant plan changes occur. This ensures competitive pricing and optimal returns for participants.

7. Conduct Participant Education

Educate employees about their retirement plan options, emphasizing the importance of participation and how to maximize their benefits. A well-informed workforce contributes to better plan outcomes.

8. Start Early on Annual Filings

Avoid last-minute scrambling by collecting and preparing documentation well in advance of annual Form 5500 filings. Starting early allows time to resolve discrepancies and anticipate auditor requests.

The Bottom Line

Compliance with ERISA, DOL, and IRS regulations is more than a legal obligation—it’s a critical step in protecting your business and your employees’ financial futures. By identifying potential pitfalls and implementing sound practices, home care employers can maintain a compliant, efficient retirement plan that attracts and retains top talent while avoiding costly penalties.

Taking a proactive approach to retirement plan oversight—and partnering with trusted experts—will position your home care agency for long-term success. Protect your business, support your employees, and build confidence in your retirement plan management by staying ahead of compliance requirements.

Risk Strategies was originally founded with a strong emphasis on complex risk management for healthcare organizations, including a deep expertise in managing your retirement plan and navigating compliance complexities.  For comprehensive guidance and solutions tailored to the unique risks of your home care agency, connect with Paul Essner or Bryan Pendrick. Our team is equipped to help you implement strategies that safeguard your organization’s future.

Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.