Step 1:
One thing that concerns me most when I do a plan audit is the liability of the plan sponsor. So, in the next few posts, you’ll get information about how to reduce your exposure and liability with plan participants, the Department of Labor and the IRS. The first step is to take a look at the way the plan is structured – whether it’s brand new or has been in place for years. Read the rest of this entry »
A recent article from CFO Magazine discusses what companies are doing to help employees avoid bad investment decisions, including the most common poor strategy, which is doing nothing to manage their investments. More than half of companies are now offering access to online investment guidance. Read details in the full article here:
http://cfo.com/article.cfm/14485672/c_14485781?f=SalmonSimsThomas&Associates
From the Wall Street Journal blog, Financial Advisor: A story about who inherits 401(k) funds when the beneficiary turns out to be responsible for the death of the plan participant. Differences in state law and IRS regulations create an interesting set of factors in these cases, creating new opportunities for judges to weigh in and possibly create new case law.
http://blogs.wsj.com/financial-adviser/2010/05/03/a-case-of-murder-and-retirement-money/
This is Part 2 in our series Five Ways to Lose Your Tax Exempt Status.
If your benefit plan was audited, then you likely spent hours going through files pulling basic information for your auditors. You may have pulled files from storage or from different offices. Worse, you may have educated your plan auditors on the basics of the plan when they had a plan document and summary plan description to read, which you gave them. You may have even found yourself researching payroll records for various employees for the entire fiscal year to determine why their employee contributions are different than the ones calculated by the auditors. Read the rest of this entry »
One of the surest ways to sow discord among employees is to cause them to have a large unexpected tax bill. This type of blunder will likely get a similar response to not making payroll. The maintenance of the tax exempt status of 401(k)’s requires some effort but prompt and appropriate action will prevent an unwanted exodus of personnel. The following mentions common plan issues that have tax implications and some useful tips for staying out of trouble. Read the rest of this entry »
If you have 100 or more eligible participants at the beginning of the plan year, then you likely need to have your plan audited by a qualified public accountant. For the purpose of the audit requirement, the participants are not simply defined as anyone who has an account balance. Participants also include persons who have met the age and service requirements for participation. However, there is some leeway offered to small plans via the 80/120 rule.
A plan that covers from 80 to 120 participants at the beginning of the year is in the gray area of the audit requirement. Basically, such a plan may choose not to have an audit if it did not need an audit in the previous year. If the plan has more than 120 participants, then it must be audited in the current year and subsequent years as long as it has above 100 eligible participants.
Get Moving Now!
The wide gap between the regulatory requirements for 401(k) and 403(b) plans is about to disappear. It’s important to take effective measures now to prevent regulators from cutting into your wallet. And, you don’t want to ignore the IRS. The new requirements issued July 24, 2007 apply to ALL 403(b) plans. Fortunately, the extra requirements, while burdensome, are not insurmountable.
You have a fiduciary responsibility to ensure that plan fees are reasonable as a plan sponsor. The best practice for meeting this fiduciary obligation is to go shopping. Ask a variety of potential vendors the same questions about what they charge for the services they provide. Obtain bids from the most promising vendors and chose your favorite.