Corrective amendments

[Guest JPIngold]

Looking for opinions --- our CPA firm is auditing a 401(k) plan administered by a large insurance company. When reviewing the payroll records and the plan document, it came to our attention that three different companies are participating in the plan, two of them are related and one is not related to either of the other two companies. The plan document does NOT contain any provisions for participating employers and, in fact, most of the contributing employees are not employed by the company sponsoring the plan.

Upon bringing this to the attention of the insurance company, they felt this was a minor issue and could be corrected by simply adopting an amendment to have the other two companies be participating employers.

Any opinions?? I am not an auditor, but am a TPA and I would think this is material enough to warrant EPCRS attention using VCP or self-correcting and submitting for a FDL.

For any auditors out there ..... what would you do from an audit standpoint regarding disclosures or even with respect to issuing a report???

Thanks.

James

[rcline46]

Not have adopting employers sign in a controlled group/affiliated service group situation is a no-no, a serious situation because you have participants in the plan who are not employees of the adopter of the plan - should be EPCRS for retroactive amendment.

But you only said related employers without specifying. THey can be related and NOT part of a CG/ASG!

And the one you said was NOT related. This makes it a multiple employer plan and if the plan is a prototype plan (standarized OR non-standarized) the plan cannot be a multiple employer plan. Not only that, but the unrelated employers must have ALL testing done separately. Likely this has not been done, so X number of years of testing and maybe corrections need to be done.

So yes, you have a VERY BIG MESS. The company administering the plan has LARGE LIABILITY, potentially depending on their service provider agreement and information provided to them. THe plan sponsor(s) also have problems.

Can we of assistance here - I see some really nice fees!

[Guest JPIngold]

My thoughts exactly, although you mentioned a few items that hadn't even crossed my mind yet. Thank you very much .... and if they need someone who actually knows what they are doing to help them out of the mess, I will let you know!!!

James