U.S. Department of Labor 401(k) Seminar


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U.S. Department of Labor 401(k) Seminar

  1. 1. U.S. Department of Labor 401(k) Seminar March 26, 2013 855 N. River Rd., Suite 300 Indianapolis, IN 46240 (317) 842-4466 www.sikich.com/indianapolis
  2. 2. Common Errors Within Benefit Plans March 26, 2013 Plan Audit – Review Environment • Department of Labor (DOL) – Plan Audit Review Process • Firm Inspections • Mini Inspections • Small Practice Inspections • Peer Review Process • Condition of Firm Membership of the American Institute of Certified Public Accountants (AICPA) and nearly all state CPA Societies • Condition of Firm Membership of Employee Benefit Plan Audit Quality Center (EBPAQC) 2©2013 Sikich LLP. All Rights Reserved. 1
  3. 3. Plan Audit Environment • Nationally, approximately 80,000 plan audits are performed annually by approximately 9,200 CPA firms • More than 100 Plan Audits – Approximately 80 CPA Firms (less than 1%) • Less than 100 Plan Audits – Approximately 9,120 CPA Firms (more than 99%) • More than half of these Firms perform only 1-2 Plan Audits per year 3©2013 Sikich LLP. All Rights Reserved. Hire a Quality Audit Firm • Verify your auditor is a member of the AICPA Audit Quality Center for Employee Benefit Plan Audits • Requires additional CPE specific to benefit plan audits • Benefit plan audits will be part of peer review process • Resources available at www.aicpa.org -go to interest areas then plan sponsor resource center • Inquire about credentials of Staff • How many benefit plan audits do they work on? • How many years experience? • Will a partner or manager be on site in the field to address issues? • Benefit plan audits are very different than corporate financial statement audits and your auditor should be trained in the EB area 4©2013 Sikich LLP. All Rights Reserved. 2
  4. 4. Dangers of Not Using a Specialist • Lost time and resources as your staff trains the auditors • Failure of the plan sponsor’s fiduciary responsibility to file a complete and accurate Form 5500 • Possible rejection by the DOL of the Plan’s Form 5500 • In the eyes of the DOL, filing a substandard plan audit with the Form 5500 is the same as not filing the Form 5500 at all • DOL can assess a penalty of $1,100 a day (up to $50,000) for a Form 5500 with a missing or deficient audit report 5©2013 Sikich LLP. All Rights Reserved. Benefits of an Audit • Ensures the plan sponsor satisfies requirement to submit a complete and accurate annual return • Make suggestions for improving internal controls • Provide recommendations on improvements for plan sponsor fiduciary requirements • Review minutes of meetings to ensure decisions are fully and accurately documented • Review contracts with third-party service providers and fee arrangements • Suggestions on best practices seen with other plans • Detecting problems early so plan sponsor can correct before identified by IRS or DOL 6©2013 Sikich LLP. All Rights Reserved. 3
  5. 5. Errors Found During Audits • Employee Deferrals • Missed processing employee elective deferral changes • Missed processing automatic % increases when plan has auto enrollment • In-house or third-party payroll service not calculating deferrals on proper types of compensation • Deferrals missed from bonus checks, manual checks, special checks, final vacation checks • Deferrals deposited late • Missed depositing deferrals from special payrolls or executive payrolls 7©2013 Sikich LLP. All Rights Reserved. Errors Found During Audits • Participant Loans • No separate loan policy if required per plan document • Not following terms of loan policy such as rate of interest or number of loans • Not starting payments timely • Not defaulting loans per terms of plan • Mergers/Spin Offs • No board resolutions or plan amendments documenting legal date of transaction – using physical transfer date improperly • No or inadequate black out notices regarding investments • No reconciliation of transfer at plan or participant level • Bad contribution cut off • Not understanding which plan is surviving plan 8©2013 Sikich LLP. All Rights Reserved. 4
  6. 6. Errors Found During Audits • Eligibility • Improper exclusion of part time, temporary or leased employees • Late notification of eligibility • Early entry into plan • Not following automatic enrollment • Miscounting number of participants for Form 5500 • Forfeitures • Not using them in accordance with plan document terms – to reduce employer match, pay plan expenses, reallocate same as match, reallocate same as profit sharing • Not recognizing forfeitures per the vesting schedule in plan document 9©2013 Sikich LLP. All Rights Reserved. Errors Found During Audits • Distributions • Miss making required distributions at 70 ½ • Miss making distributions by the age required in the plan – i.e. age 65 • Incorrectly applying vesting in calculations • Allowing hardships or in-service distributions if plan does not allow • Not obtaining and retaining proper evidence of hardship • Not properly stopping or restarting employee deferrals when a hardship was taken • Not stopping annuity payments when participants die 10©2013 Sikich LLP. All Rights Reserved. 5
  7. 7. Errors Found During Audits • Partial Plan Termination • Not considering whether one has occurred when large amount of employees are involuntarily terminated • Plan expenses • Not following terms of service agreement • Not allowed to be paid by plan, plan sponsor should pay • Discrimination Testing • Testing not performed • All required tests not performed • Testing failures not addressed or not addressed timely • No consideration of controlled group issues 11©2013 Sikich LLP. All Rights Reserved. Sample Plan Sponsor Controls • Payroll/Contributions • Ensure that the employee contributions are remitted within the appropriate time period • Ensure correct amount of employee contributions are remitted to the custodian and deposited timely into proper employee accounts • Ensure custodian invested money timely into participant accounts • Recalculate amount of employee deferral withheld • Review settings in payroll system to ensure deferrals and match are calculated on correct types of compensation 12©2013 Sikich LLP. All Rights Reserved. 6
  8. 8. Sample Plan Sponsor Controls • Participant Loans • Ensure employee loan repayment amounts are correct • Recalculate balance on selected loans to ensure in accordance with amortization schedules • Disbursements • Recalculate vesting/forfeitures on selection of distributions • New Hires • Review a sample of new hires to ensure they were offered participation and enrolled timely into the Plan 13©2013 Sikich LLP. All Rights Reserved. Sample Plan Sponsor Controls • Oversight Committee • Establish a committee to monitor administrative and investment issues • Meet regularly • Document meeting decisions and discussions (take minutes) • Administrative Fees • Periodically benchmark fees for reasonable and ensure advisor renegotiates your fees with your service provider • Ensure that fees charged are in accordance with service agreement 14©2013 Sikich LLP. All Rights Reserved. 7
  9. 9. Questions? Michael D. Wolf, CPA Manager Sikich LLP 8555 North River Road, Suite 300 Indianapolis, IN 46240 317.842.4466 mwolf@sikich.com This document is not written tax advice directed at the particular facts and circumstances of any person. Nothing herein shall be construed as imposing alimitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this document is not intended to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.About Sikich• Multi-disciplinary: An accounting, advisory, investment banking, technology and managed services firm with clients in the U.S. and internationally. $76M in revenue in 2012• Excellent reputation: With a reputation for professional excellence, Sikich provides unsurpassed client service as 6,776 public and private sector clients well as timely and cost effective services. 7,364 individual clients• Strong talent: We employ more than 400 talented people including 71 153,882 square feet to serve clients partners, all of whom devote their careers to a focused area. 400+ total personnel• Award winning: Accounting Today ranks 71 partners the Firm 40th nationally among the top 100 accounting firms and 12th in the top 100 VARs. 1 collaborative and positive culture 8
  10. 10. Honors & Recognitions Accounting Technology • #47 in Accounting Today’s • Top 1% of all ERP solution 2012 Top 100 Accounting partners in the world Firms • 2012 Microsoft Dynamics • INSIDE Public Accounting’s Inner Circle Top 50 Accounting Firms in • 2012 Microsoft Dynamics 2012 Presidents Club • INSIDE Public Accounting’s • #12 on Accounting Todays Top All-Star Firms in 2012 100 VARs in 2012 • #13 on Bob Scotts Top 100 VAR List for 2012 Tracing Our Roots 2012 30th Anniversary$80,000,000$70,000,000 2008-2011 Merges with 4$60,000,000 CPA firms and 1998 solidifies$50,000,000 position in the Top 50 with Merges with Intelligent Computer$40,000,000 1982 Solutions LLC and starts its more than 375 employees technology practice Sikich Gardner & Co. was$30,000,000 formed; takes up residence in Aurora and Springfield$20,000,000$10,000,000 $0 18 9
  11. 11. Sikich Service Lines Advisory Business Valuation Accounting, Audit & Tax Dispute Advisory Financial Reporting Financial Advisory Employee Benefit Plan Audit Flex-Staff Solutions Accounting Services Human Resources Tax Planning Marketing & Public Relations Supply Chain Technology Investment Banking Accounting & ERP Software Managed Services Acquisitions Advisory CRM Software Outsourced Accounting Sales Advisory IT Infrastructure Managed IT Capital Raises Cloud & Hosting Solutions Outsourced Human Resources Strategic Advisory Strategic IT Planning Outsourced Marketing & Public Communication & Collaboration Relations IT ConsultingSecurities are offered through Sikich Corporate Finance LLC, a registered broker dealer with the Securities Exchange Commission and a member of FINRA/SIPC.Advisory services offered through Sikich Financial, a Registered Investment Advisor. General securities offered through Triad Advisors, Member FINRA/SIPC. Industry Expertise, Tailored Approach » Non Profit » Construction Deep industry experience and » Healthcare longevity. » Government » Higher Education Cross sectional teams » Agriculture with a depth and breadth » Manufacturing & Distribution of experience to handle the complete solution. » Professional Services » Real Estate » Retail Solution centric and product agnostic. 10
  12. 12. Michael D. Wolf, CPAManagerMichael D. Wolf, CPA, specializes in audit and assurance services. Hisprimary focus is on providing audit and assurance services to not-for-profit,manufacturing, construction, service, and employee benefit plan clients.He understands the issues facing these organizations and is extremelyfamiliar with the risk factors that need to be considered in designing andperforming their audits, as well as the business issues they face in themarketplace. Mike also has considerable experience in the area ofcorporate and individual taxation, including multi-state planning and 8555 North River Road Suite 300compliance. Indianapolis, IN 46240Service Areas P: 317.842.4466Assurance and Advisory Services F: 317.577.7724Income Tax Planning, Consulting E: mwolf@sikich.comConstruction ServicesNot-for-Profit ServicesManufacturing ServicesEmployee Benefit Plan AuditsAffiliationsAmerican Institute of Certified Public AccountantsIndiana CPA Society Peer Review CommitteeMember, various Task Force CommitteesConstruction Financial Management AssociationCarmel Chamber of CommerceKnights of ColumbusCentral Indiana Chapter of the Kelley School of Business Alumni Association Past Board Member and Past Program Committee ChairSpringmill Crossing Property Owners Association, Past TreasurerEducationBachelor of Arts Degree in Accounting, Indiana University
  13. 13. Employee BenefitPlan AuditDeveloping and maintaining employee benefit plans requires considerable time, effort andresources—after all, your employees rely on benefits to secure their futures. Presentingyour benefits provider with incomplete or inaccurate audit reports may result in plandisqualification or significant penalties. Maintain the benefit plans on which your employeesrely by working with the experts at Sikich. Working with Sikich professionals will offer youdistinct advantages, including:úú Assurance of qualityúú Efficient audit processúú Potential fee savingsúú A detailed constructive management letterúú Access to up-to-date benefit plan regulatory and accounting issues through: • Meetings • News alerts • Special focus mailings • Seminars and webinarsReceive top-quality help from credentialed, highly trained and experienced professionalswho are dedicated in employee benefit plan audits, administration and consulting services—and who work with more than 200 plans firm-wide.Your time and resources are valuable, which is why our team approaches employee benefitplan audits in an efficient manner—reducing the time we need from your personnel andallowing them more time for their regular duties.Included in the audit is a management letter that identifies opportunities to correct potentialproblems before they lead to penalties or plan disqualification. Additionally, discover how toachieve and maintain a competitive advantage—essential for employee retention—througha section in the letter that is focused on current trends in the employee benefits area, andwhich benefits other companies are currently offering.Rely on the employee benefit plan practice of Sikich to provide accurate, complete, timely,professional and cost-effective services that will meet your organization’s specific objectives,now and in the future. 877.279.1900 | info@sikich.com www.sikich.com ©2013 Sikich LLP. All Rights Reserved.
  14. 14. Sikich ProfileOrganizationSikich is a dynamic accounting, advisory, technology, and managed services firmcomprised of more than 400 employees. Our firm began in 1982 and is now one ofthe country’s Top 50 largest CPA firms and Top 100 VARs, operating eight offices. service areasIndustries AwardsSikich provides services and solutions � 2012, Accounting Today Top 100 Firms: � Accounting to a wide range of industries. In certain ranked 47th nationally Consulting Servicesindustries, we have devoted substantial � 2012, Accounting Today Regional Leadersresources to develop a significant base – Top Firms: Great Lakes: ranked 7th � Assurance Servicesof expertise and experience: � 2012, Accounting Today Top 100 Value � Business Valuation� Agriculture Added Reseller (VAR): ranked 12th� Construction � 2012, INSIDE Public Accounting 100 � Dispute Advisory� Employee Benefit Plans Largest Accounting Firms: ranked Services� Government 47th nationally � Graphic Design� Healthcare � 2012, Daily Herald Business Ledger Book Marketing Services� Higher Education of Lists: ranked 3rd, Accounting Firms;� Manufacturing Distribution Chicago Western Suburbs � Human Resource� Not-for-Profit � 2011, Crains Chicago Business Book of Consulting� Professional Services Lists: ranked 12th, Accounting Firms � Investment Banking � Real Estate � 2011, Chicago Tribune’s Chicagos Corporate Finance� Retail Top Workplaces � 2011, Best and Brightest Company � Retirement PlanStatistics Services to Work For™Revenues .................................. $64.5M � 012 - 2006, Chicago’s 101 Best and 2Total Partners .................................... 67 � Tax Services Brightest Companies to Work ForTotal Employees .............................. 356 � 2010, Accounting Today Best Accounting � Technology ServicesTotal Personnel ................................ 423 Firms to Work For ProductsPersonnel count as of April 12, 2012 � 2009, Best Places to Work in Central � Wealth Management Illinois, sponsored by The SpringfieldSikich Total Revenues Business Journal � 2009, 2008, 2006, Sikich designated as member of the Microsoft Business Solutions Inner Circle � 006, 2005 Two Sikich business solutions 2 clients awarded Microsoft Business Solutions Pinnacle award � 2005, Certified Microsoft Dynamics – NAV Partner of the Year 877.279.1900 | info@sikich.com www.sikich.com ©2012 Sikich LLP. All Rights Reserved.
  15. 15. Sikich ProfileCertificationsAll professional accounting staff having more than one year of experience have earned orare working toward earning the designation of Certified Public Accountant. Sikich LLP isa member of the American Institute of Certified Public Accountants Governmental Audit LOCATIONS:Quality Center and the Employee Benefit Plan Audit Quality Center. We adhere to the strictrequirements of membership which assure we meet the highest standards of audit quality. Corporate OfficeIn 2011, Sikich LLP received its 8th consecutive unmodified (“pass”) peer review report. 1415 W. Diehl Rd., Suite 400This is the highest level of recognition conferred upon a public accounting firm for its quality Naperville, IL 60563control systems. Phone: (630) 566-8400 Chicago, IL 123 N. Wacker Dr., Suite 1500 Chicago, IL 60606 Phone: (312) 648-6666Microsoft Partner Decatur, ILSikich has earned a Microsoft ERP Gold competency; ranked among the top 1% of 132 South Water St., Suite 300all Microsoft Dynamics partners worldwide; and carries the following certifications: Decatur, IL 62523 Phone: (217) 423-6000� icrosoft Small Business Specialist M � MRMS (Microsoft Retail Management Systems) � CP (Microsoft Certified Professional) M � ISA (Certified Information Systems Auditor) C Denver, CO� CSE (Microsoft Certified System Engineer) M � NE (Certified Novell Engineer) C 6021 S. Syracuse Way, Suite 111� CNA (Cisco Certified Network Associate) C � MS CSM (Microsoft Customer Service Manager) Greenwood Village, CO 80111� CDA (Certified Cisco Design Associate) C � MS CAE (Microsoft Certified Account Executive) Phone: (720) 200-0142� CEA (Citrix Certified Enterprise Administrator) � CDBA (Microsoft Certified Database Admin.) C M Indianapolis, IN 8555 N. River Rd., Suite 300 Indianapolis, IN 46240 Phone: (317) 842-4466 Rockford, IL 6815 Weaver Rd., Suite 100 Rockford, IL 61114 Phone: (815) 282-6565Sikich is proud to be part of the Leading Edge Alliance Springfield, ILThe Leading Edge Alliance (LEA) is the second largest international association of 3201 W. White Oaks Dr., Suite 102independent accounting firms.* The LEA is an international professional association of Springfield, IL 62704independently-owned accounting and consulting firms. Members are top quality firms Phone: (217) 793-3363who share an entrepreneurial spirit and a drive to be the premier provider of professionalservices in their chosen markets. The Alliance provides Sikich with an unbeatable St. Louis, MOcombination: the comprehensive size and scope of a large multinational company while 12655 Olive Blvd., Suite 200offering their clients the continuity, consistency, and quality service of a local firm. St. Louis, MO 63141*International Accounting Bulletin, 2011 Phone: (314) 275-7277 LEARN MORE: www.sikich.com/blogSecurities are offered through Sikich Corporate Finance LLC, a registered broker dealer with the SecuritiesExchange Commission and a member of FINRA/SIPC. Advisory services offered through Sikich Financial, 877.279.1900 | info@sikich.coma Registered Investment Advisor. General securities offered through Triad Advisors, Member FINRA/SIPC. www.sikich.com ©2012 Sikich LLP. All Rights Reserved.