Retirement Plan Compliance and Controls

Transcription

1 Retirement Plan Compliance and Controls Cindy Lusk, CPA, RPA Manager, Employee Benefit Plan Practice May 12, 2015 Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 1

2 Retirement Plan Compliance and Controls This material was used by Elliott Davis Decosimo during an oral presentation; it is not a complete record of the discussion. This presentation is for informational purposes and does not contain or convey specific advice. It should not be used or relied upon in regard to any particular situation or circumstances without first consulting the appropriate advisor. No part of the presentation may be circulated, quoted, or reproduced for distribution without prior written approval from Elliott Davis Decosimo. Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 2

3 Why does it matter? The number of 401(k) plans has grown to more than 300,000 plans covering more than 42 million people With the recent high-profile failures of companies with large employee benefit plans, today s workforce is even more concerned about what their employers are doing to protect their retirement assets DOL has stepped up its enforcement activities dramatically looking for prohibited transactions, delinquent remittances of 401(k) employee contributions and other ERISA noncompliance The U.S. Department of Labor (DOL), the courts and Congress are actively working to define the fiduciary responsibilities of companies with respect to their employee benefit plans Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 3

4 Fiduciary Responsibility - Common Issues No employee benefit plan committee Minutes related to key plan sponsor decisions not documented or retained Lack of investment policy The client utilizes outsourced services (e.g. TPA or payroll) and there is no documentation of over-sight or review of services provided The plan sponsor does not review SOC 1 Report (formerly SAS 70 Report) The client fails to maintain fidelity bond requirements (e.g. no fidelity bond, did not meet minimum coverage, or fiduciary insurance) Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 4

5 Compliance and Controls Compensation - Common Errors Plan sponsor misapplies the definition of compensation Exclusion of bonuses, manual checks, fringe benefits, severance pay (as defined by the terms of the Plan document) Prevention - Know your plan s definition of compensation - Review your payroll system for proper inclusion/exclusion of compensation types used in the deferral and match calculations - Review your payroll systems annual plan deferral and match limits Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 5

6 Compliance and Controls Eligibility - Common Errors Employees are participating before they are eligible Employees are not given the opportunity to participate when they become eligible The plan sponsor does not retain evidence that eligible employees are informed of their right to participate Prevention - Know your plan s eligibility requirements and entrance dates - Review your procedures for enrollment to ensure employees are notified - of eligibility - Provide payroll with a listing of eligible employees Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 6

7 Compliance and Controls Missing Payroll or Personnel Data - Common Errors The plan sponsor is missing data such as employee change sheets, timecards or census information - Prevention Review or implement procedures for maintenance of personnel files Consider a checklist for personnel file maintenance Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 7

8 Compliance and Controls Contributions - Common Errors Remitted to wrong participant account due to input errors Calculated incorrectly Remitted late - Prevention Review trust statements for potential input errors Reconcile payroll records to amounts remitted to the plan Know your plan s provisions for contributions and true-ups Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 8

9 Compliance and Controls Distributions - Common Errors The plan made unauthorized distributions (i.e. no valid documentation for hardship distributions or did not obtain a loan first where loans are permitted by the Plan) - Prevention Implement procedures for authorization of distributions Retain hardship documentation, including an assessment of any loan balances available to the employee Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 9

10 Compliance and Controls Vesting - Common Errors Incorrect vesting period - Prevention Reconcile the third-party administrator s census information to payroll records Implement procedures to track rehired employees Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 10

11 Compliance and Controls Forfeitures - Common Errors Misapplication of forfeitures Forfeitures were not allocated within time frame required by plan - Prevention Review your plan document to determine how forfeitures can be utilized and the timeframe for use Review forfeiture balance at least annually and discuss use of available balances with your third-party administrator Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 11

12 Compliance and Controls Census - Common Errors Incomplete census Census does not reconcile to payroll records - Prevention Reconcile third-party administrator s census data to payroll records Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 12

13 Compliance and Controls Plan Loans - Common Errors Loans not made in accordance with Plan document Loan payments misapplied - Prevention Determine how many loans your plan allows to be outstanding and the terms for loans Reconcile loan payments on the trust statement to loan repayments per your payroll records Review detailed loan reports for compliance with plan provisions and DOL regulations Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 13

14 DOL Hot Topics Fair Value Measurement - Plan management is responsible for determining fair value of assets - Increased scrutiny by PCAOB/DOL Partial Plan Terminations - 20% or more - closing of a plant, downsizing or product line - Can occur over 3 year period - previous, current and next year - Separated participants become fully vested Using the Work of a Pricing Specialist - ESOPs, privately held stock, pension valuations Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 14

15 DOL Hot Topics Lost Participants - Unclaimed benefits and uncashed checks - Automatic rollover provisions Use of Forfeitures - Defined by plan document - Opportunity for abuse DOL Audit Quality Enforcement Project and AICPA Peer Review Developments - Recurring Deficiencies Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 15

16 Could you be liable? Many administrators of employee benefit plans do not monitor compliance with plan documents, legal or regulatory requirements Federal agencies and Congress have adopted tough new rules that place responsibility for mismanaged retirement plans in the hands of company directors and officers - Agencies are working with private plaintiffs to go after individual directors and officers in court when a pension plan collapses A poor quality audit of a plan s financial statements can have dire consequences for the sponsor and the participants - The DOL and the IRS have developed audit programs that impose sanctions of up to 20% of plan assets for failing to manage a plan in accordance with the plan document, the Internal Revenue Code and ERISA requirements. i.e. sanctions imposed on plan assets of $4,000,000 translates to a $800,000 penalty to be paid by the Company Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 16

17 What s the difference? Today, more than 7,500 CPA firms perform more than 80,000 annual audits of employee benefit plans 54 firms perform more than 100 plan audits 6,000 CPA firms perform 5 or fewer plan audits Many firms offer low fee pricing but may not be qualified to perform audits of this highly specialized area When selecting an auditor for your plan financial statements, there are several factors to keep in mind - Purpose of the audit - Uniqueness of plan audits - CPA firm resources - Reasonable size ERISA audit practice - Understanding the limited-scope audit exception Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 17

18 Providing Additional Resources to Meet Your Needs Subscribe at Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 18

19 Cindy Lusk, CPA, RPA Phone: Website: Elliott Davis Decosimo ranks among the top 30 CPA firms in the U.S. With sixteen offices across seven states, the firm provides clients across a wide range of industries with smart, customized solutions. Elliott Davis Decosimo is an independent firm associated with Moore Stephens International Limited, one of the world's largest CPA firm associations with resources in every major market around the globe. For more information, please visit elliottdavis.com. Elliott Davis Decosimo, LLC Elliott Davis Decosimo, PLLC 19