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Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
Employee Benefit Plan Audits: Collaboration Not Chaos
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Employee Benefit Plan Audits: Collaboration Not Chaos

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No one enjoys an audit, except for maybe the auditor, but it is an important function in many aspects of business. This includes retirement plans with more than 100 participants. With the number of …

No one enjoys an audit, except for maybe the auditor, but it is an important function in many aspects of business. This includes retirement plans with more than 100 participants. With the number of service providers involved, the employee benefit plan audit can get chaotic in a hurry. In this presentation, we review how auditors and service providers can work together to facilitate a smooth audit for their mutual clients.

Published in: Economy & Finance, Business
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  • 1. Employee Benefit Plan Audits: Collaboration Not Chaos ASPPA Webcast August 22, 2013 Presented By Adam C. Pozek DWC ERISA Consultants, LLC 651.204.2600, ext. 107 Adam.Pozek@DWCconsultants.com CariAnn Todd BeachFleischman, PC 682.203.6556 CTodd@BeachFleischman.com
  • 2. Agenda • Roles and responsibilities – • The “basics” – – • • Who is looking for what? Plan documents Nondiscrimination testing Correcting plan errors Challenging situations – – – – Forfeiture accounts Partial plan terminations Non-traditional assets (if we have time) Uncashed checks (if we have time) 2
  • 3. Roles and Responsibilities • Who are the players? – – – – – – – TPA Recordkeeper Investment professional Actuary CPA Attorney Other • What do they do and for what are they responsible? • What is the level of expertise/experience? 3
  • 4. Who Is Looking For What? • TPA – Specific • Census data • Nondiscrimination testing • Etc. • Auditor – General and specific • • • • • • Economic conditions Regulatory factors Fraud risk Plan provisions Plan operations, including internal controls Plan AND participant level activity 4
  • 5. Importance of Qualified Auditors 5
  • 6. Importance of Qualified Auditors • AICPA Employee Benefit Plan Audit Quality Center – www.aicpa.org/InterestAreas/EmployeeBenefitPlanAuditQuality/Resources/PlanSponsorResourceCent er/Pages/default.aspx 6
  • 7. A Note On Limited Scope Audits • Allows the Plan Administrator to INSTRUCT the auditor to limit the scope of testing on investment information • Application – Only to investment information prepared and CERTIFIED by a qualified trustee or custodian as “complete and accurate” – Only when assets are held by a bank, insurance company or institutional trustee – May exclude some hard to value assets – Not applicable to participant account tests 7
  • 8. A Note On Materiality • Audit – – – – Variations by plan Variations based on facts and circumstances Varies by account class Different at plan and participant level • Qualification – Generally, no materiality threshold 8
  • 9. Plan Documents • Describe how the plan is to be operated • Failure to exactly follow plan terms = operational failure – Courts and IRS  intentions don’t matter if inconsistent with plan terms • Impact to plan financial statements • Potential area for conflict – Timely execution of documents and amendments – Changes not communicated to all parties 9
  • 10. Nondiscrimination Testing • Dictates the contributions/benefits that can/must be provided or the refunds that must be made • Potential areas for conflict – – – – – Various options and nuances Responsibility for testing data Timing/responsibility for refunds Revisions based on audit findings or employer decisions Revisions when data changes but result does not 10
  • 11. Correcting Plan Errors • Error may be ambiguous or immaterial • Type of error may or may not impact financial statements • More than one way to correct certain errors • Examples – Missed deferral opportunities – Participant loans – Definition of compensation 11
  • 12. Correcting Plan Errors • Potential areas for conflict – Responsibility for catching/correcting the error – Responsibility for performing the detailed calculations – Business decision not to correct 12
  • 13. Late/Missed Deferrals • Potential areas for conflict – – – – – Type of error Determination of lateness Responsibility for calculating lost earnings Responsibility for preparation of Form 5330 Reporting in multiple years 13
  • 14. Forfeiture Accounts • Plan assets • Must be “spent down” each year and cannot be carried forward • Potential areas for conflict – – – – Lack of overt plan provision requiring allocation Responsibility for notifying plan sponsor Responsibility for actually using forfeitures First-time audit for plan with accumulated forfeitures 14
  • 15. Forfeiture Accounts • Additional information – IRS Revenue Rulings 80-155 and 84-156 – Treasury Regulation section 1.401-7(a) – IRS Retirement News for Employers newsletter • Spring 2010 • Available at www.irs.gov/file_source/pub/irs-tege/rne_spr10.pdf 15
  • 16. Partial Plan Terminations • • • • Presumed to occur at turnover rate of 20% May span multiple years Full vesting for those participants impacted Potential areas of conflict – Usually not determined until after the fact – Improper forfeitures and benefit payments • Additional information – IRS Revenue Ruling 2007-43 – Treasury Regulation section 1.411(d)-2(b) 16
  • 17. Non-Traditional Assets • Valuation requirement • Disclosure in audit report – ASC 820 (f/k/a FAS 157) • Benefit payments • Prohibited transactions 17
  • 18. Non-Traditional Assets • Reporting on Form 5500 • Small plan audit requirement 18
  • 19. Non-Traditional Assets • Potential areas for conflict – All of the above • Additional information • www.PozekOnPension/pozek-on-pension/2011/04/donald-trump-elvesand-401k-plans-part-1.html 19
  • 20. Self-Directed Brokerage Accounts • Differences in reporting – Audit report must show assets by category – Form 5500 allows single-line item reporting 20
  • 21. Self-Directed Brokerage Accounts • Level 3 rollforward: 21
  • 22. Self-Directed Brokerage Accounts • Potential areas for conflict – Responsibility for dissecting SDBA statements to obtain necessary data by asset category – Fees for doing so 22
  • 23. Un-cashed Checks • Reinstatement of participant accounts for stale-dated checks • Impact on participant count for audit threshold • Plan asset? • Potential areas for conflict – Responsibility for tracking un-cased checks – Form 5500 reporting of the amounts in question 23
  • 24. CariAnn Todd BeachFleischman, PC 682.203.6556 CTodd@BeachFleischman.com Questions Adam C. Pozek DWC ERISA Consultants, LLC 651.204.2600, ext. 107 Adam.Pozek@DWCconsultants.com

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