There are many 401(k) plan provisions that are legal under the Internal Revenue Code and ERISA, but can complicate the administration of the plan by the plan sponsor, assisted by the third party administrator. These provisions may increase the likelihood of administrative error, thereby increasing plan sponsor liability and the risk of plan disqualification by the Internal Revenue Service. This article states many popular plan provisions that should be avoided, so they can facilitate the proper administration of a 401(k) plan.
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