Audit Communications and DOL Update November 19, 2014 By: Stan Bowles, CPA
Bio • Partner with Brown, Edwards & Company, LLP • Tax, healthcare, consulting and EBP services • 20 years of experience • BE is the 124 th largest US firm out of 330,000 • 7 office locations and 200 employees • Firm is a member of the AICPA EBPAQC • Firm performs over 100 EBP audits per year • Firm also provides TPA services and assists with plan designs and documents
Discussion Topics • Role of regulators (DOL and IRS) • Plan sponsor responsibilities • Employee benefit plan examination process • Plan sponsor compliance and preparation • Correcting plan errors • Hot topics • Questions
Roles of Regulators • IRS has primary jurisdiction over qualified plans, which includes examining plans and processing requests for determination letters. • Department of Labor (DOL) has primary jurisdiction over the fiduciary standards, reporting and disclosure requirements and other rules.
Plan Sponsor Responsibilities Keeping the plan in compliance: • Plan document written to comply with all requirements of the IRC. • Plan administered to follow the terms in operation. • Review the plan annually to make sure it’s operating according to its terms and the law.
Examination Process • Very structured process • The IRS even provides a flow chart of the process!
Examination Process Key focus areas include: 1. Eligibility, participation and coverage 2. Vesting 3. Discrimination 4. Top heavy requirements 5. Contributions and benefit limits
Examination Process 6. Funding and deductions 7. Distributions 8. Trust activities 9. Plan and trust documents 10.Returns and reports
Compliance & Preparation Top 10 tips to prepare for an efficient audit 1. Have readily available: Plan documents, including amendments, SPD, etc. Opinion letters/determination letters Requested records efficiently organized Agreements with service providers 2. Have appropriate people available Trustee, custodian, attorney, etc. 3. Be prepared to explain terms of the plan
Compliance & Preparation Top 10 tips to prepare for an efficient audit 4. Be prepared to explain operation of the plan Administrative forms (deferral agreements, etc.) Loan and hardship documentation 5. Be prepared to provide all applicable test results 6. Be prepared to explain internal administrative processes Practices and procedures (payroll, remittances) Internal controls
Compliance & Preparation Top 10 tips to prepare for an efficient audit 7. Be prepared to identify plan errors 8. Be prepared to provide information about related employers/entities 9. Consider utilizing annual self-audit as a verification tool (small plans not subject to audit) 10.Consider utilizing available IRS resources
Compliance & Preparation So how can I keep up with compliance and be prepared? • IRS 401(k) plan checklist (other plan types also available) • 401(k) Plan Sponsor fiduciary audit file checklist (RBC Wealth Management as an example)
Correcting Plan Errors The Employee Plans Compliance Resolution System (EPCRS) provides for 3 types of programs for correcting plan errors: 1. Self-correction program (late deferral payment remittance corrected with form 5330) 2. Voluntary correction program (failure to get plan audited and not yet notified by IRS of audit requirement) 3. Audit closing agreement program (errors fixed as result of IRS or DOL audit)
Hot Topics • Plan amendment requirement for same sex marriages – Windsor case – amendments required by 12/31/14 if the plan defines spouse as member of opposite sex and/or the plan wishes to refer to the outcome of Windsor case • Disclosure of plan fees – applicable for 2013 • 2015 changes – Eligible comp increased to $265,000; deferrals increased to $18,000; catch-up contribution (50 and older) increased to $6,000
Questions
Contact Information Stan Bowles, CPA Partner Brown, Edwards & Company, L.L.P. P.O. Box 16999 Bristol, VA 24209-6999 Phone number: 276-466-5248 E-mail address: sbowles@becpas.com Website: www.becpas.com
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