McKonly & Asbury Webinar - Current 401(k) Trends and Risks


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This webinar looked at current trends and risks related to employer sponsored 401(k) plans. The discussion included current fiduciary, accounting, and fraud/risk trends that can assist management in planning for 2014 regulatory filings.

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This webinar was hosted by Dan Sturm (Audit Principal) along with fellow speakers Shalane Cohen (Senior Audit Manager) and Danielle Guinter (Audit Manager), all with McKonly & Asbury.

Current 401(k) Trends and Risks

Published in: Business, Economy & Finance
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  • McKonly & Asbury Webinar - Current 401(k) Trends and Risks

    1. 1. FRAUD ENGAGEMENT FROM A TO Z S A M U E L B O W E R C R A F T , M S I S , C I S A & D A V I D H A M M A R B E R G , C P A , C F E , C I S S P , M C S E , W X Y Z
    3. 3. MCKONLY & ASBURY, LLP • Audit, Tax and Advisory Firm • Regional presence in Pennsylvania • Variety of clients ranging from construction to manufacturing and other clients • Employee Benefit Plan Specialty • Defined Contribution • Defined Benefit • Health and Welfare • ESOP • Best Places to Work and Best Accounting Firm
    4. 4. INTRODUCTIONS Daniel Sturm, CPA • 10+ years of Employee Benefit Plan audit experience Danielle Guinter, CPA • 8+ years of Employee Benefit Plan audit experience • 529 & retirement plan specialist prior to joining McKonly & Asbury Shalane Cohen, CPA • 6 years of employee Benefit Plan audit experience
    5. 5. AGENDA AND BACKGROUND Current 401(k) trends and risks based on • Questions received from clients • Common plan deficiencies reported by DOL • Research performed by our team Topics discussed today • Fiduciary responsibility • Current risks and trends • Fraud
    6. 6. WHAT IS A PLAN FIDUCIARY? • Anyone who uses discretion in administering and managing the plan or controlling the plan’s assets. • Based on functions performed, not just the person’s title • DO NOT have to be named in the written plan document to have fiduciary responsibilities
    7. 7. WHO SHOULD BE INVOLVED WITH THE PLAN? • Personnel from: • Human Resources • Finance • Benefits of having members of HR and Finance working together: • Improved understanding of the Plan • Better identification of risks • More efficient resolution of issues and concerns • More efficient audits of your plan
    8. 8. RESPONSIBILITIES OF THE PLAN FIDUCIARY • Act SOLELY in the interest of plan participants and their beneficiaries. • When making decisions, they must be prudent and follow the plan document. • Ensure that the participants have diversified investments to reduce the risk of large investment losses • Participants are paying only REASONABLE plan expenses
    9. 9. WHO PAYS THE EXPENSES? • The plan document typically dictates who pays the expenses • Expenses may be paid by participants or plan sponsors Types of Expenses • Administration fees • Individual service fees • Investment fees
    10. 10. HOW DO YOU EVALUATE THE PLAN EXPENSES? • Have a PROCESS for making decisions • Policy for surveying potential providers • Understand the service(s) that you are receiving • DOCUMENT the process
    11. 11. KEEPING UP WITH ONGOING RESPONSIBILITIES • Everything with the Plan should be continually monitored, including fees • Investment committee (if applicable) or Fiduciary and plan management should be meeting routinely to discuss fees • DOCUMENT the discussions of these fees
    12. 12. THE ROLE OF AN ADVISORY COMMITTEE • Starting an advisory/plan committee should be a priority • Mitigates the risk of potential lawsuits • Committee typically includes: • Executive Management • Finance • Human Resources • Investment Advisor • Anyone who had valuable information for the Plan
    13. 13. COMMUNICATION AND DISCLOSURE OF FEES • Fees must be communicated to participants prior to and subsequent to participation in the plan. • Sponsor is ultimately responsible for making sure fees are properly disclosed.
    14. 14. COMMUNICATIONS FROM THE IRS AND DOL • Audits may be performed over entire plan or specific red flag areas. • Audits may be performed on-site ore remotely through the requests for information. Red flags may be triggered by: • Comparison of retirement plan data to health and welfare plan data • Significant drop in plan participants indicating a possible partial plan termination
    15. 15. PARTIAL PLAN TERMINATION • A partial plan termination analysis should be performed when: • Lay offs occur • Sale of a portion of the business • Typical threshold to use is a 20% reduction in participants • Participants affected by the partial plan termination shall become 100% vested. • Analysis should involve an ERISA attorney
    16. 16. DOL/IRS HOT TOPICS • Pension codes on Form 5500 • Disclosure of changes in accountants or actuaries • Late remittances
    17. 17. THE DOL AND LATE REMITTANCES • Late Remittances • Large plans - Employee contributions must be remitted as soon as administratively possible • Small Plans – 7 days • Consult an ERISA attorney for uncertainties
    18. 18. VFCP AND SELF CORRECTING • Disclose late remittances on supplemental schedules • Better to self-correct than do nothing at all • Correction process may take some time, but is not overly difficult
    19. 19. WHAT TO EXPECT DURING AND AUDIT Reasons you were selected: 1. Completely at Random – LUCKY YOU! 2. Something stood out on your 5500 3. Participant complaint DOL audit is more focused on participant • Are their fees reasonable? IRS audit is more focused on compliance from an operational standpoint • Adopting amendments timely • Performing discrimination testing and correcting, if necessary • Hardship withdrawals in accordance with Plan Doc
    20. 20. NOTIFICATION OF AUDIT • Requests often begin with the following: • Plan documents • Summary annual Reports • Payroll deduction reports • Fidelity bond information • Investment policy • Committee meeting minutes • Documentation of internal controls • Provide information requested TIMELY! • Asking for more time is better than providing incomplete data
    21. 21. RESOURCES TO AVOID COMMON PLAN PITFALLS • IRS Plan sponsor responsibility listing • IRS fixing common plan mistakes document • DOL article about understanding retirement plan fees and expenses • AICPA audit quality center • • • •
    22. 22. BEST PRACTICES • Understanding plan document and understand it some more • Perform self-audits of processes and transactions • Review your 5500 carefully and ask questions of preparer
    23. 23. DOL/IRS ITEMS OF FOCUS • IRS determination letter cycles • DOL/IRS are using data analytics more frequently since the implementation of EFAST
    24. 24. IN SUMMARY • Risk continues to grow with sponsoring 401(k) plans • Fraud opportunities occur and continue to exist • Focus of DOL and IRS continues to be on the participants and compliance USE YOUR RESOURCES!!
    25. 25. THANK YOU Additional Questions? Please contact us. • Dan Sturm • Shalane Cohen • Danielle Guinter
    26. 26. FRAUD ENGAGEMENT FROM A TO Z S A M U E L B O W E R C R A F T , M S I S , C I S A & D A V I D H A M M A R B E R G , C P A , C F E , C I S S P , M C S E , W X Y Z