NY CPE Program ERISA audits
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NY CPE Program ERISA audits



As you are probably aware over one-third of ERISA audits are inadequate. Prohibited Transactions, Hidden Fees & Conflicts of Interest in Employee Retirement Plans. Learn how to quickly find Prohibited ...

As you are probably aware over one-third of ERISA audits are inadequate. Prohibited Transactions, Hidden Fees & Conflicts of Interest in Employee Retirement Plans. Learn how to quickly find Prohibited Transactions and verify income.



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NY CPE Program ERISA audits NY CPE Program ERISA audits Presentation Transcript

  • Employee Benefits Security Administration29 CFR Part 2550 §408(b)(2)Prohibited Transactions, Hidden Fees & Conflicts of Interest in Employee Retirement PlansNY CPE ProgramMarch 15, 2011Charles Massimo, President, CJM Fiscal ManagementJames HollandRick Canipe, EA, CFP, QKATreasury License 77840IRS CAF 03-0123051R
    Content Courtesy of
    James Holland
    Rick Canipe, EA, CFP, QKA
  • Why Be Here? What shall we review?
    ERISA Budget Accounts are missing and they’ll pay your audit fees
    Investment Friction lawsuits
    Fiduciaries breached duty of prudence by investing in retail share classes*
    Prohibited Transactions
    They’re in >80% of YOUR plans
  • Learn how to quickly find Prohibited Transactions and verify income
  • AICPA Membership CPE Requirements
    • Documentation and Record Retention
    • Members bear primary responsibility of documenting compliance with CPE requirements. For each program the member should be able to document the following:
    • Sponsor
    • Title and description of content
    • Date(s)
    • Location
    • Number of CPE contact hours
  • Your Client’s Responsibilities
    LEGAL EXPOSURE. In DiFelice, the 4th Circuit Court of Appeals writes, “Good faith does not provide a defense to a claim of breach of these fiduciary duties; ‘a pure heart and an empty head are not enough.’”
    DOL Assistant Secretary Campbell recently testified, “After initially selecting service providers and investments…, fiduciaries are required to monitor plan fees and expenses to determine whether they continue to be reasonable and whether there are conflicts of interest.”
  • SAS 104-111
    Calls for thorough documentation of the audit. The Plan Sponsor can face financial penalties if the audit is deemed deficient because the documentation was incomplete.
  • Your Challenges
    “The Labor Department has also uncovered misunderstandings on how to audit investments. Audit procedures on parties in interest and prohibited transactions are also an area the Labor Department feels is not properly audited. Auditors need to perform procedures to address prohibited transactions with parties-in-interest.”
    —Diane Wasser, Officer in Charge — Pension Services Group, Amper, Politziner & Mattia P.C., The Metropolitan Corporate Counsel (July 2007)
  • Common Audit DeficienciesDOL & Peer Review Findings
    Related Party/Prohibited Transactions
    • No related parties noted in workpapers
    • Lack of understanding as to what are prohibited transactions
    • Parties-in-interest, not N/A
    Sponsor is a party-in interest/meets exception
  • Example Control Deficiency # 6
    Improper valuation of investments, especially alternative investments
  • Your Competitors
    10,000 independent qualified public accountants audit 76,000 plans
    • 6 perform more than 1,000 audits, (80% of all plan assets)
    • 64 perform more than 100 audits that cover 25,000 plans
    • 8,000 perform 5 or fewer audits
    • 4,800 perform only 1 audit
  • Who are we?
    • An ERISA “independent fiduciary” that relieves other fiduciaries of the responsibility for the plan’s decisions.
    • [ERISA §405(d)(1)]
    • U.S. Dept. of Labor Regulations §2509.95-1(c)(6)
  • IRS Enrolled Agent
    U.S. Treasury License 77840, No Limits
    IRS Centralized File (CAF) 03-0123051R
    This document is intended to be used by the recipient only and not shared unless approved by MillenniuM. It is not intended to constitute legal or tax advice in any particular matter. Transmission of this report does not create a MillenniuM-client relationship. The firm does not warrant and is not responsible for errors or omissions. Any legal or federal income tax advice contained in this communication is neither intended nor written to be used as such or to avoid penalties under the Internal Revenue Code or to promote, market or recommend a transaction or legal/tax matter addressed herein.
  • Landscape
    Why All the Lawsuits and Legislative Efforts?
  • 1% expense ratio and 1% trading costs me 50% of my wealth!
  • The 3 Waves of Lawsuits
    Investment Managers
    Plan Sponsors (including C-Suite)
    Fiduciary Breaches
    8-figure Settlements
    Do not underestimate LaRue
    Service Providers
  • Lawsuits Against Plan Sponsors
    A search of 401(k) lawsuits highlights three (intertwined) areas of concern:
    Excessive Fees
    Employees Arguing Financial Harm
    Fiduciary Breaches / Negligence
  • 401k Prohibited Transactions
    • Excise tax:
    • the first tax on a prohibited transaction is 15% of the sum involved.
    • You can avoid paying the compulsory tax(100% of the sum involved) if the transaction is corrected before the next taxable period.
  • Prudent Expert Manual
    Arming CEOs, CFOs, HR Directors
  • Retail vs. Institutional
    Wal-Mart 401(k) Pays Retail - Forbes.com
    Jan 18, 2010 ... "Merrill Lynch, with Wal-Mart's blessing, was choosing mutual funds based... Because the case involves the giant retailer and controversial ...www.forbes.com/forbes/.../investing-walmart-retirement-401k-paying-retail.html