Employee Benefit Plans and COVID-19 Impact

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THURSDAY, JULY 9, 2020
2:00 PM – 3:00 PM
M O D E R A T O R : A l e x a n d e r R e y e s
P A N E L I S T S : J o h n E u s a n i o &
T i f f a n y M c G h e e
EMPLOYEE BENEFIT
PLANS AND COVID-19
IMPACT
WEBINAR

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WELCOME & INTRODUCTION
ALEXANDER REYES, CPA
Partner & Practice Leader, Financial Services
646.695.7842
areyes@citrincooperman.com

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AGENDA
• The CARES Act and your retirement plan
• Fiduciary responsibility and evaluating investments
during volatile markets
• Managing participant anxiety during market
downturns
• Financial reporting considerations
• Top 10 most common errors
• Questions and Answers

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MODERATOR & SPEAKERS
JOHN M. EUSANIO, CPA, CGMA
Partner & Practice Leader, Employee
Benefits & Not-For-Profit
646.979.6091
jeusanio@citrincooperman.com
TIFFANY MCGHEE
Partner, CEO, and CO-CIO of
Institutional Investment Services
443.379.2444
tiffany@momentum-advisors.com
ALEXANDER REYES, CPA
Partner & Practice Leader, Financial Services
646.695.7842
areyes@citrincooperman.com

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CARES ACT
• On Friday, March 27, the president signed into
law the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) to address the
unprecedented public health and economic crisis
related to COVID-19.
• How does the CARES Act affect your retirement
plan?

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CARES ACT
• Types of plans that may be impacted/eligible
under the CARES Act
 401 (a) plans, including 401(k) plans
 403 (a)
 403 (b), and
 457 (b) – governmental plans

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CARES ACT

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FIDUCIARY RESPONSIBILITY & EVALUATING
INVESTMENTS DURING VOLATILE MARKETS

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FIDUCIARY RESPONSIBILITY
Board of Directors
PLAN FUNDING
Design
Cost Analysis
Actuarial
Assumptions
Funding Schedule
Expense Reporting
COMPLIANCE
ERISA & IRC
Discrimination
Filings
Notices
Restatements
TRUSTEE
Custody
Trading
Reconciliation
Reporting
Payments
Distributions
INVESTMENT
MANAGEMENT
Asset Allocation
Diversification (Style,
Market Cap, Geography
Security Selection, Buy
& Sell Decisions, etc.)
ADMINISTRATION
Participant Accounting
Transaction Processing
Confirmations
Technology
Benefit Calculations
EMPLOYEE
UNDERSTANDING
Audience
Content
Media
Frequency

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FIDUCIARY COMPLIANCE
Plan sponsors should have reputable
providers and advisors in place
Minutes should document discussions about
regulatory updates, plan compliance, changes
in plan features/design, changes in
investment options/performance, and
reasonableness of plan fees
Resources available to plan –
Communication!

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ERISA PLAN FIDUCIARY RESPONSIBILITY:
INVESTMENTS
Under ERISA, plan sponsors must:
•Have a documented process for selecting,
monitoring, and eliminating funds from the plan
•Ensure that all plan fees, including those of the
underlying investments are reasonable
•Have offer a diversified investment offering if
intending to comply with ERISA section 404c.

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CARRYING OUT YOUR FIDUCIARY DUTY
• Create a written investment policy statement and
review regularly
• Establish a plan investment committee
• Create a documented process for fund selection
and monitoring

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EVALUATING INVESTMENTS DURING VOLATILE
MARKETS
Have a systematic and repeatable process

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MANAGING PARTICIPANT ANXIETY DURING
MARKET DOWNTURNS

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KNOW YOUR PARTICIPANTS
• Know your participants
 Track demographic data
 Track investment allocation data
 Track savings data
• Create an Education Policy Statement
 Determine method and frequency of group and one-on-one
sessions
 Know plan replacement ratio
 Track and review metrics annually
• During volatile markets
 Hold event-specific group sessions
 Offer additional individual sessions

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COVID-19 & CARES ACT ADDITIONAL
CONSIDERATIONS

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FINANCIAL REPORTING CONSIDERATIONS
• Delayed, reduced or suspended plan contributions
• Plan terminations or partial plan terminations
• Financial deterioration of the plan sponsor,
• Participant loan collectability problems
• Impact to fair value of investments
• Impact to reliability of assumptions
• Going concern assessment
• Adoption of CARES Act provisions
• Workforce reduction disclosures
• Changes in business processes and internal controls
• Remote Work & Remote Audits
• Auditor and accountant reporting – emphasis of a matter

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TOP 10 MOST COMMON ERRORS

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IRS & DOL FINDINGS
• Not following Plan Document
 This is basically your foundation and operating manual
 Clarity in definitions and terms within document
• Not keeping plan document up-to-date
 Amendments
 New rules or regulations enacted
• Incorrect criteria for compensation to calculate deferrals
 Do you have numerous pay codes or payroll systems?
 Is what occurs operationally reflective of what is contemplated
in Plan Document?
• Untimely Remittances
 Late deposits are one of the most common issue
 Deposited as soon as “administratively reasonable” or possible
but never later than 15th business day of month

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IRS & DOL FINDINGS
• Improper participant loans and hardship withdrawals
 Does your plan document clearly identify permissible reasons for such
withdrawals?
 Do you have appropriate controls in place to monitor?
• Failing to perform ADP/ACP nondiscrimination testing
 IRS believes this is greatest failures for 401(k)
 Improper exclusion of eligible employees for purposes of ADP and/or ACP
testing
 Misclassification of highly and non-highly compensated employees for ADP
and/or ACP testing
• Not Filing Form 5500
 Must be filed annually
 Mandatory audits not complete and Form 5500 not submitted as result
• Not following eligibility requirements
 Are service records appropriately kept
 Do you do any periodic checks of eligibility from your population?

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OTHER AUDIT FINDINGS
Proper notice
to
participants
was not given
(e.g. safe
harbor,
match)
Forfeitures were
not properly
applied (i.e. to
reduce future
employer
contributions or
plan expenses
Hardship
distribution
provisions
were not
followed
Auto-enrollment
and auto-
escalation
provisions were
not followed or
employees were
allowed to
contribute before
eligible
RMDs were
not properly
administered
Loan
amortization
schedules
extend
beyond 5-
year max
Cash-out
provisions were
not adhered to
(i.e. cash out of
terminated
participant
balances below
$5,000)

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NAVIGATING THE RISK
• Check your plan document & provisions
 Ensure you understand plan documents definitions for key terms, eligibility, provisions for
deferrals and loans
• Mind the calendar
 Late submissions are often not done intentionally (illness, oversight, etc.)
 Know when reporting and timely submissions are due and ensure back up plans are
established
• Internal Controls
 Is there a policy and procedure manual
 Segregation of duties and supervision
 Automation of tasks rather than manual intervention
• Hire competent advisors
 2015 DOL study confirmed that of the 400 plan audits conducted across multiple firms
there was a 40% failure rate
 Not all firms and advisors are specialized in handling pension matters
 Cost should not be the sole determining factor
 Ask pertinent questions: Number retirement plans conducted overall, experience of
engagement team, has firm been reviewed by DOL, is it a member of the AICPA Audit
Quality Center?

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NAVIGATING THE RISK (CONT’D)
• Hiring and training employees to properly administer the plan
• Make sure advisors/providers you trust are in place and that
they provide the level of service needed
• Ensure committee meetings are held regularly and the right
committee members are in place
• Segregation of duties are applied whenever possible to
mitigate collusion and prevent fraud
• Review and reconcile participant and plan transactions for
accuracy
• Communication

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ABOUT CITRIN COOPERMAN’S EMPLOYEE
BENEFIT PLAN PRACTICE
At Citrin Cooperman, we understand that the employee benefit practice is a specialized area requiring specialized expertise. We have responded by forming our
Employee Benefit Plans Practice, comprised of professionals who remain focused and up-to-date on employee benefits issues. The Employee Benefit Plans Practice
consists of a network of professionals committed to maintaining technical competence in the area and to dedicating a portion of their time to audits of employee
benefit plans, so that they can rightfully claim specialist status.
Citrin Cooperman’s Employee Benefit Plans (EBP) Practice conducts full- and
limited-scope audits of single and multi-employer plans, defined benefit plans,
defined contribution plans including 401(k), 403(b), ESOP, money purchase and
profit-sharing plans. Our EBP professionals specialize in providing audit and
advisory services for employee benefit plans of all sizes for entities in various
industries.
Citrin Cooperman knows that the marketplace needs a quality firm that can
provide high quality audit services to employee benefit plans. The Global Six
firms are devoting their resources to their largest, and most complex attest
clients; needing to refer in a quality accounting firm to perform the audits of
their clients’ employee benefit plans. Citrin Cooperman has a robust employee
benefit plan audit practice with highly qualified professionals predominately
from Big Four, Global Six, and other national firms, positioning it to be a leader
in this space. Citrin Cooperman has a dedicated team to effectively support
transitions from these firms.
QUICK FACTS
 Serve over 250 employee benefit retirement plans
 100 to over 20,000 participants
 Plan assets $4 million to over $20 billion
 Member of AICPA Employee Benefit Plan Audit Quality
Center
Citrin Cooperman is a firm that continues to make significant
commitment to our audit practice. The firm makes consistent and
increased investments in the audit practice, including our “3Ts” – talent,
training, and technology. Our state of the art audit process focuses on
efficiently and effectively auditing middle-market companies and
employee benefit plans; not audits of Big Four clients with market caps
over $300 billion like Apple, Microsoft, Amazon, and Facebook.
Focused On Your Fiduciary Duties

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ABOUT CITRIN COOPERMAN

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ABOUT MOMENTUM ADVISORS
RETIREMENT PLAN SERVICES
Plan Consulting Fiduciary Partnership
Plan Document
Design
Plan Fee
Benchmarking
Investment Selection,
Monitoring &
Performance
Benchmarking
Vendor Liaison
Fiduciary Education Participant Education

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DISCLAIMER
These materials provided by Citrin Cooperman & Company, LLP, are intended to provide general information on
a particular subject or subjects and are not an exhaustive treatment of such subject(s) and are not intended to
be a substitute for reading the legislation. Any advice contained in this communication, including attachments
and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid
tax-related penalties. The materials are being provided with the understanding that the information contained
therein should not be construed as legal, accounting, tax or other professional advice or services. Before
making a decision or action that may affect you or your business, you should consult with Citrin Cooperman &
Company, LLP, or another qualified professional advisor. The materials and the information contained therein
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THANK YOU