Case Studies in Ethics

Transcription

1 Case Studies in Ethics Alison J. Cohen, Senior Associate Ferenczy Benefits Law Center Alison J. Cohen, Senior Associate Ferenczy Benefits Law Center Alison J. Cohen, J.D., CPC, is a Senior Associate with Ferenczy Benefits Law Center LLP in Atlanta, Georgia. Alison advises clients on many issues related to qualified retirement plans, including design, mergers and acquisitions, audits, and operational issues. Alison commonly works with clients that have operational issues and guiding them through the Internal Revenue Service (IRS) and/or Department of Labor (DOL) corrective programs, preparing corrective filings, and preparing and supporting clients through an audit conducted by the IRS and/or DOL. Alison is a member of the Georgia and California State Bars and holds her designation as a Certified Pension Consultant from the American Society of Pension Professionals and Actuaries (ASPPA). 1

2 Alison J. Cohen, Senior Associate Ferenczy Benefits Law Center Prior to joining Ferenczy Benefits Law Center, Alison worked at a large bundled service provider for nearly 16 years as an Associate Vice President, Compliance Manager and Regulatory Liaison. As part of her responsibilities there, Alison served as a national speaker on audit and correction issues. Alison currently sits on the Employee Plans Subcommittee of the IRS Advisory Committee on Tax-Exempt and Governmental Entities (ACT). Actively involved with ASPPA, Alison is a current member of the organization s Retirement Plan Academy Board and served in past years as the Chair of the CPC Exam Committee. Session Overview Introduction Case Studies Marketing or Game of Thrones? Do the right thing. Or not. What lies beneath. No Speed. Children of the Corn. Questions 2

3 Introduction Governing rules and requirements Why case studies? Discussion rules Governing Rules and Regulations NIPA Standards of Professional Conduct Where is this posted in your office? Is training on ethics part of your new hire training? When did you last read it? Circular 230 ERPA, tax professional DOL Fiduciary Regulations? SEC/FINRA financial advisors 3

4 Marketing or Game of Thrones? Marketing or Game of Thrones? Two main TPAs in a region compete for business Large company (ABC) with TPA #1 Can TPA #2 send proposals and communication to ABC? TPA #2 meets with ABC and hears that they are experiencing slow service lately. TPA #2 says that it is due to staff leaving TPA #1. Is this ok? TPA #2 tells ABC President that the owner of TPA #1 has been drinking because after he was caught cheating on his wife, she has left him and has filed for divorce. Is this ok? What if it s true? 4

5 Do the Right Thing. Or not. Do the Right Thing. Or not. Client is a very clever businessman with 19 different entities with some portion of ownership. He has never had a proper controlled/affiliated service group evaluation conducted by ERISA counsel. You are hired to administer a 401(k) Plan for the main entity. It was only 3 adopting employers. During your onboarding process, Client mentions that there are other plans among the entities. But that he got an opinion that they are ok. Can you continue to administer the 401(k) Plan? What if you get an indemnification in writing? Does it matter if it is a DB Plan? 5

6 What Lies Beneath What Lies Beneath TPA #1 has been growing steadily and profitable. TPA #1 decides to purchase TPA #2. In their haste to close the deal at a good price, no review was done on the book of business. Once TPA #1 starts performing annual administration on the cases formerly with TPA #2, it is discovered that there was a systemic problem with testing that impacts approximately 60% of the cases. Some of the cases are no longer with TPA #1. TPA #1 completes the current year s testing and no client notices or complains about the difference. 6

7 What Lies Beneath (cont.) Does TPA #1 have an obligation to go back and retest all impacted plans? What about terminated clients? If they need to go back and retest, how many years? Should it matter as to the cost of the possible corrections? What if a client actually does notice the difference in testing and brings it to your attention? An affected client gets selected for audit do you tell the IRS about the issue? Do you make the client decide? No Speed. 7

8 No Speed. A lucky client has gotten selected for an IRS audit. In preparing the documents to provide to the IRS, you notice that you re missing certain plan documents and you pick up on some operational errors. After letting the client know what you found, they ask you to stall the IRS while they look for the missing pieces. Should you follow the client s instruction? The operational error in question it appears was your firm s fault. Your boss wants to fix the problem and retroactively change the documentation. Because the correction is being made, is this ok? No Speed. Timing for the audit is really inconvenient for the client. They ask you to tell the auditor that they are having surgery and will be unavailable for 2 months. The client is actually having elective surgery, but will only be out for 2 weeks. Can you tell the IRS that you need a 2 month extension? NOTE: Make sure you have read TE/GE Memorandum dated November 21,

9 Children of the Corn Children of the Corn Mom owns a thriving business with her husband. They have 15 employees and several are in their age group. Their CPA attends a seminar and comes back advising them to sell the company to the adult children (who will have nothing to do with the business in reality), and the parents will continue to run it as they always have receiving no compensation. They will move their real estate holdings, formerly part of the company, into a new company and receive a salary for managing the real estate. 9

10 Children of the Corn The CPA tells them they can then set up a Defined Benefit Plan for the new company benefiting only the parents and not have to give anything to the employees. Is there anything wrong with this arrangement? What, if any, Sections of Circular 230 may be violated by moving forward with this arrangement? What are your obligations? Questions? 10

11 Contact Information Alison J. Cohen Ferenczy Benefits Law Center LLP 2200 Century Parkway, Suite 560 Atlanta, Georgia (678) (V) (866) (toll free) (404) (F) Follow us on 11