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Benefits in the News > By Subject >

Ret plans - audits by gov't agencies


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Final EPCU Report: Money Purchase Pension Plan Contributions Project
"The Employee Plans Compliance Unit (EPCU) identified calendar year 2012 money purchase plans filing a Form 5500-SF as a small plan that reported no contributions and contacted a sample of the sponsors to determine the reason for the lack of contributions.... The majority of cases complied with the MPPP contribution requirement because they were either amended or set up with a 0% contribution formula. Some of the plans with no self-employment earnings or earned wages indicated that the participant(s) retired and they were holding the plan assets until they met one of the plan's allowable distribution events." (Internal Revenue Service [IRS])
What You Should Know About Retirement Plan Audits
"Some key questions to ask on a checklist include: For plan documents, are all required amendments present? Do you enroll participants in a timely fashion? Do those eligible for matching contributions receive them? Do you apply contributions correctly? Do you execute on all the rights that terminated employees have under the plan? Can you illustrate the effectiveness of your process through documentation? Are all the various aspects of the plan operating correctly -- enrollment, contributions, in-service withdrawals, hardship loans, and termination?" (Vanguard)
Too Hot to Handle? The Truth About Retirement Plan Audits (PDF)
5 pages. "[A]voiding penalties and other enforcement actions from the DOL can be as easy as taking a few steps to prepare prior to a DOL audit. Effective preparation entails understanding how the retirement plan audit has evolved and changed over time, and what issues are top of mind for the DOL in its current audit investigations.... [S]taying attuned to just a few potential 'red flag' areas of retirement plan management can keep plan sponsors ahead of the audit game and provide them with peace of mind that their policies are in compliance with ERISA mandates." (Roland|Criss, via Journal of Compensation and Benefits)
IRS Publication 1-EP: Understanding the Employee Plans Examination Process, Revised November 2014 (PDF)
3 pages. "The goal of Employee Plans Examinations is to promote voluntary compliance by reviewing the operation of retirement plans for consistency with plan terms and pension law.... There are several ways a retirement plan is selected for examination ... A specially-trained examiner will notify you by phone or letter that your plan has been selected for audit ... The audit may include a complete review of plan operations or it may focus on specific issue ... The most common areas of review include [followed by a list] ... Most plan failures can be corrected using EPCRS." (Internal Revenue Service [IRS])
Specific Power of Attorney Needed for Firm's Employees to Dispute Tax Issues Under Circular 230 (PDF)
"Companies that want specific employees to advocate, negotiate or dispute issues with the Internal Revenue Service must provide a Form 2848, Power of Attorney, for that employee, the IRS Office of Professional Responsibility said in new Circular 230 guidance.... Form 2848 must be signed by a duly elected officer or director of the corporation. 'Vanity-titled' corporate officers aren't legally authorized to execute a power of attorney, the IRS said." (Internal Revenue Service [IRS])
DOL Inspector General Audits EBSA
"[T]he Inspector General recently began sending out letters to sponsors of small plans who claimed an audit waiver, requesting: [1] a copy of [the] plan's Summary Annual Report showing all qualifying investments and regulated financial institution certification(s) for the plan's investments, trust statements and associated detailed asset schedules; and [2] documentation used to calculate the number of participants at the beginning and end of the year on forms 5500-SF. The Inspector General will use the results to prepare a report on how well the EBSA is doing at monitoring the small plan audit exemption." (American Society of Pension Professionals & Actuaries [ASPPA])
Preparing for -- and Surviving -- a 401(k) Plan Audit (PDF)
35 presentation slides. Topics include: [1] Identify Your Plan Fiduciaries; [2] Fiduciary Standards of Conduct; [3] Establish Internal Controls; [4] Audit Flags: Where do they begin? How do they decide? What catches their attention? [5] Self-Audit: Plan Document Review and Plan Operations Review; [6] IRS Examination Steps; and [7] Being Successful in an Audit. (Millennium Trust Company)
Five Ways to Avoid a DOL Audit of Your 401(k) Plan
"[1] Respond to employee inquiries in a timely way. The most frequent trigger for a DOL audit is a complaint received from an employee.... [2] Improve employee communication.... [3] Fix your plan -- now.... Many times plan sponsors are aware that a certain provision in the plan is a friction point for employees.... [4] Conduct your own audit.... [5] Make sure your 5500 is filed correctly. The second most frequent cause of a DOL audit is problems which are identified on the annual Form 5500 filing. The most common 5500 errors include failing to follow EFAST 2 Electronic Filing Guidance, not attaching all required schedules and failing to answer multiple part questions." (Lawton Retirement Plan Consultants)
Top Three Reasons DOL Auditors Come Knocking
"In 2013 alone, 775 new DOL investigations were opened as a direct result of benefit plan participants' complaints.... Increasingly, employers are being audited by the DOL for Form 5500 errors.... In many cases, the feds' audits are completely random." (HR Benefits Alert)
What Will the IRS Be Looking into Next?
"The agency is initiating a defaulted loan project under its Learn/Educate/Self-Correct/Enforce (LESE) program ... [Other] future projects by the IRS will include a late corrective distribution project under its Learn/Educate/Self-Correct/Enforce (LESE) program, and projects for 401(k) plans with a Roth feature, small employers with multiple plans, and non-qualified 401(k)s under its Employee Plans Compliance Unit (EPCU)." (planadviser)
Use IRS Audit FAQs, Agent Training Manuals to Prepare for Potential Examination (PDF)
"IRS makes a distinction between an [Employee Plans Team Audit (EPTA)] and a non-EPTA audit, but indicates that chances are an employer plan would be subject to an EPTA audit. So, what's the difference? The EPTA audit looks first to the employer's internal controls, and believes what is discovered should direct the nature and depth of the remainder of the audit. The non-EPTA audit is not a team audit. It focuses on specific qualification issues identified at the beginning of the audit, including things such as the plan sponsor's industry or a specific problem such as defaulted loans or a merger or acquisition involving the plan sponsor." (ERISAdiagnostics, Inc., via Thompson Pension Plan Fix-It Handbook)
Growing Number of DOL Audits Makes Preparation Critical (PDF)
"IRS and the [DOL] have improved their data-mining techniques, which is enabling them to conduct more targeted audits.... DOL's Office of the Chief Accountant [OCA] recently contacted by form letter a sample of plan sponsors that filed retirement plan Forms 5500 annual reports but did not file a health-plan Form 5500. The OCA is also auditing independent accounting firms that perform ERISA financial audits, focusing primarily on the 2011 plan year and those firms that do not perform a significant volume of ERISA audits[.]" (ERISAdiagnostics, Inc., via Thompson Pension Plan Fix-It Handbook)
What the EBSA Asks for in a 401(k) Plan Audit: Documentation You Will Need
"Plan sponsors of defined contribution plans will likely be required to produce the following [20 items] in response to an audit ... [T]here are certain documents that relate to the plan (like plan documents) and certain information related to the sponsor. Plus there is a lot of financial data ... The time to see if you have this required information is before you receive the audit request. So consider this list as a test. If there is a request here that you could not satisfy if you were undergoing an audit, now is the time to locate that information." (Fox Rothschild LLP)
EBSA to Focus on Conflict-of-Interest Rule, Prohibited Persons, Audits
"The civil enforcement efforts of [EBSA] achieved nearly $1.7 billion in monetary results during the 2013 fiscal year, Phyllis C. Borzi, Assistant Secretary of Labor for EBSA [said] ... The agency also closed 320 criminal investigations in fiscal year 2013, with these cases resulting in 88 indictments ... Borzi said that the agency's 'most important regulatory priority' continues to be the re-proposal of the conflict-of-interest rule, which is expected to redefine the term fiduciary." (Bloomberg BNA)
Get Your Ducks in a Row: 58 Questions from the Department of Labor (PDF)
"Frequently, plan sponsors want a satisfactory answer to the question, 'why me?' However, the 'why' is less important than ensuring the sponsor's responses to the Department 's inquiries are addressed completely and accurately. And while each audit may generate questions specific to the audit being conducted, there are a number of questions that come up on a recurring basis providing a good opportunity for plans to 'self-audit' their compliance and record retention practices." (Multnomah Group)
Rome Was Not Built in a Day: Build Internal Controls One Step at a Time
"The IRS recognizes that gaps and hiccups will arise when comparing form, the plan document & design, to the plan's operations, administrative processes and procedural activities.... The IRS expects the plan sponsor to take three steps when gaps or hiccups arise. First, is finding the problem.... Second, correct the problem.... Third, but very certainly not the least important, the plan sponsor must strengthen their processes, procedures and internal controls with the intent to avoid gaps or hiccups in the future." (Business of Benefits)
Checklist for Preparing for Your Employee Benefit Plan Audit
"If you don't know the details of your plan, it will be tough to know if you are complying.... Schedule a meeting with all of your service providers, including your auditors, plan custodians, third-party administrators and internal staff who will oversee the audit. Make sure everyone knows their role in the audit process ... Delegate a gate-keeper to keep track of all audit information ... Understand what the auditors will be testing." (DiCicco, Gulman & Company LLP)
[Guidance Overview] Plan Corrections Take on a Slightly New Look with Revenue Procedure 2013-12 (PDF)
"The new procedure makes a number of important administrative and substantive changes to the correction program, to both streamline and expand the program. The key changes are ... Expansion of Plans Covered ... Missing Participants ... Pre-Approved Defined Contribution (DC) Corrections ... Definition of Earnings ... Pre-Approved Defined Benefit (DB) Corrections ... The VCP Application Process ... The Audit CAP Program[.]" (Groom Law Group via Journal of Pension Benefits)
[Guidance Overview] Handout for IRS Defined Benefit Plan Update Webinar, September 18, 2014 (PDF)
52 presentation slides. Agenda: [1] Guidance on recent legislation: HATFA, Notice 2014-53, and Cooperative and Small Employer Charity Pension Flexibility (CSEC) Act; [2] Other recent and pending guidance; [3] Common issues arising in examinations. [BenefitsLink note: This link is broken. The presentation slides were available online immediately prior to the webinar; however, as of September 20, 2014, they cannot be found on the IRS website. We'll keep checking and will repair this link if and when the document is restored.] (Internal Revenue Service [IRS])
Text of IRS Request for OMB Approval for Customer Satisfaction Surveys
"The IRS is requesting approval to conduct 41 specific customer satisfaction and opinion surveys, which will allow us to continue to use a data-driven approach to understanding customer satisfaction at the Internal Revenue Service (IRS)." [See List of proposed surveys, which includes materials for Employee Plans Examinations and Employee Plans Determinations] (Internal Revenue Service)
[Guidance Overview] OIG Recommends EBSA Provide Guidance and Oversight for ERISA Plans Holding Hard-to-Value Alternative Investments (PDF)
"[OIG] recommended the Assistant Secretary for Employee Benefits Security take the following actions for plans holding hard-to-value alternative investments: (1) propose and formalize guidance and evaluate the ERISA Council recommendations, (2) improve procedures in enforcement reviews, and (3) improve Form 5500 data collection, analysis, and targeting. In response, EBSA stated that it did not believe the trillions of dollars of plan assets invested in alternative investments and hard-to-value assets pose significant valuation concerns, that ERISA already provided sufficient guidance, that its investigative procedures were sufficient, and that the Form 5500 already focuses on asset valuation. EBSA agreed to further consider the OIG recommendations, but did not provide any explicit corrective actions." [Full 47-page report is available here.] (U.S. Department of Labor, Office of Inspector General -- Office of Audit)
[Guidance Overview] How Do You Spell Relief? E-P-C-R-S
"[T]he program is designed to place plan participants in the position they would have been in had the error in question not occurred in the first place. This may involve making additional contributions, revising compliance testing or reversing improper payouts. EPCRS ... offers the flexibility to craft custom fixes in unique situations or when one of the samples is not practical.... Although it can be inconvenient, EPCRS does require that full correction be made, including errors that may go back multiple years." (Preferred Pension Planning Corporation)
[Official Guidance] Treasury Department's Contingency Plan in the Event of a Lapse in Appropriations
"IRS would halt non-automated collections and tax processing activities, but would continue activities necessary for the protection of government property. These activities include, but are not limited to, processing tax payment remittances; computer operations necessary to prevent loss of data in process and revenue collections; retaining minimal personnel to maintain safe conditions for essential personnel; maintaining criminal law enforcement and undercover operations; and the protection of statute expiration, bankruptcy, liens and seizure cases. The IRS would halt taxpayer services such as responding to taxpayer questions, including telephone customer service functions." (Internal Revenue Service)
DOL to Conduct Audit Quality Study
"The [EBSA Office of the Chief Accountant (OCA)] will begin to send letters to sponsors of selected plans this month requesting the sponsor have the plan auditor send copies of the respective audit workpapers to the OCA's offices for review. Plan sponsors are expected to respond to the OCA inquiry letter within 15 days. Any questions regarding the study should be directed to the OCA offices." (Schneider Downs)
Upcoming Employee Plans Guidance Phone Forum, October 29, 2013
"Join us for an overview of retirement benefit items on the 2013-2014 Priority Guidance Plan released on August 9 and other projects in EP Technical Guidance. Please email your questions by October 22, 2013." (Internal Revenue Service)
[Guidance Overview] Slides for August 29 IRS Phone Forum: Tools to Prepare for an Audit (PDF)
47 slides. Topics include: Resources; Examination selection methodologies; Preparing for the audit; Tips for a smooth & efficient audit; Exam Process Guide; Large case considerations; Impact of new EPCRS under Rev. Proc. 2013-12; Common examination errors; and How can plan sponsors improve compliance? (Internal Revenue Service)
DrinkerBiddle ERISA Newsletter for Retirement Plan Service Providers, August 2013 (PDF)
Articles include: [1] SEC Staff Examination Priorities -- Are There Changes Ahead for Unregistered Plan Recordkeepers? [2] 408(b)(2) Change Disclosures; [3] 'Closing' Thoughts: Practical Tips for Service Providers in Winding Up a DOL Investigation; [4] Retirement Income Projections: The DOL's Notice; and [5] Fiduciary Obligation to Select Appropriate Share Classes. (DrinkerBiddle)
[Guidance Overview] Slides for Aug. 8 IRS Phone Forum: The Importance of Good Internal Controls (PDF)
64 slides. Excerpt: "Good Internal Controls Affect an Employee Plan Audit: [1] The EP agent will evaluate the effectiveness of the plan's internal controls to determine to perform [a] A focused audit (just look at 3-5 issues) or [b] Expand the scope of the examination; [2] Good internal controls are a key factor in keeping an audit 'focused'; [3] The internal control interview helps the examiner determines whether the plan is [a] Well run or [b] Whether there are serious compliance risks that would give rise to expanding the scope of the audit." (Internal Revenue Service)
[Official Guidance] Transcript and Recording of IRS Phone Forum: 403(b) Corrections and Examination Trends
Excerpt: "The goal of this session is to provide a summary of the changes made in Revenue Procedure 2013-12 to the corrections for 403(b) Plans. Specifically, what we'll focus on is what 403(b) failures can be corrected under the Voluntary Correction Program.... While the primary focus of this session will be on Corrections under Revenue Procedure 2013-12, we also need to look back to the prior Revenue Procedure, and that's Revenue Procedure 2008-50, because that guidance will be helpful when it comes to analyzing whether a 403(b) operational failure that occurred prior to January 1, 2009, is eligible for correction." [Editor's note: The slides to which the speakers refer in this May 23, 2013 phone forum are online (click).] (Internal Revenue Service)
Trustee of Defunct New York City Garment Companies' Pension Plans Settles DOL Suit Alleging Misuse of More Than $4.2 Million in Plan Assets
"The [DOL] has obtained a consent judgment in federal court in which the trustee of two defined benefit pension plans admits to entering into $4,232,915 in alleged unlawful plan transactions between 2002 and 2010. [The] trustee and fiduciary to the pension plans ... also agrees to restore, up to that amount, any shortfall in assets owed to the plans' participants and beneficiaries.... The lawsuit alleged that [the trustee] authorized the pension plans to make improper loans and transfers of plan assets over several years to multiple recipients[.]" (Employee Benefits Security Administration, U.S. Department of Labor)
[Guidance Overview] Employee Plan Fix-It Programs and How to Use Them (PDF)
18 presentation slides. Excerpt: "Why Use These Programs? IRS and DOL are increasing audit activity; Some problems may be self-corrected; Higher penalties apply if the plan sponsor doesn't find the problem first; Electronic filing of 5500's means that there will be faster followup if return indicates noncompliance." (Osler, Hoskin & Harcourt LLP)
The Regulators Are Coming
"[EBSA's] budget has decreased for 2014, but this will not affect enforcement.... Fred Reish, a partner in Drinker Biddle's Los Angeles office, said, in his experience, once the investigations are underway, the DOL has looked most closely at prohibited transaction issues by acknowledged fiduciaries.... Reish agreed that the industry can expect to see more enforcement when it comes to IRAs, but added, 'We may also see more about prohibited transaction exemptions like in [PTE 86-128 Class Exemption for Securities Transactions Involving Employee Benefit Plans and Broker-Dealers]. People will definitely need to be a bit more careful with IRAs.'" (PLANSPONSOR.com)
U.S. Plan Audit Activity by DOL and IRS is on the Rise
"Does your 401(k) plan pay higher than average fees? Do you have more than one qualified plan? A number of recent reports indicate why you may receive special scrutiny if your plan is selected for audit or investigation.... Here is some information about new projects and what the auditors will be looking at, and some advice how to prepare." (Osler, Hoskin & Harcourt LLP)
Avoiding Form 5500 Audit Traps
"One of the most immediately recognizable benefits of EFAST2 is the increase in the efficiency with which the Form 5500, related schedules and independent qualified plan auditor's report may now be reviewed.... It comes as no surprise then that regulatory correspondence and examination activity is on the rise during the EFAST2 era. The DOL reportedly corresponded with thousands of employers last year requesting further explanation of or amendments to previously reported information. The IRS and DOL are likely to audit more retirement plans this year than any year before, and EFAST2 is undoubtedly a highly contributing factor." (Multnomah Group)
IRS Final Report on 401(k) Compliance Check Questionnaire (PDF)
"The Final Report explains the sample selection and analysis methods and provides the response to each question by percentage of plans, plan sponsors, or participants. It also includes stratified data based on plan size and a section on Automatic Contribution Arrangements. The findings will be used to gain a better understanding of the health and compliance behaviors of 401(k) plans and to better allocate IRS resources to foster voluntary 401(k) plan compliance." (ING)
McCready and Keene Employee Benefits Newsletter, April 30, 2013 (PDF)
Topics include: [1] Spring Cleaning? Don't Get Rid of Important Documents! [2] Finding Lost Participants; [3] IRS Final Report on 401(k) Plans; and [4] Failure to Notify Early Retiree of Benefit Enhancement Resulted in Payment of Lost Benefits. (McCready and Keene, Inc.)
PBGC Seeks Involuntary Plan Termination before Plan Sponsor's Proposed Share Sale
This complaint demonstrates PBGC�s willingness to seek involuntary plan terminations when it is unable to negotiate additional contributions or other security for underfunded defined benefit plans within the context of corporate transactions, even when the plan sponsor will continue as a going concern after an arms-length transaction." (Proskauer's ERISA Practice Section Blog)
408(b)(2): The Never Ending Story, or an Area of Opportunity for Advisors?
"For some financial professionals, changes to Section 408(b)(2) of ERISA may have seemed like a one and done effort ... The [DOL] has already added a question to their audit checklist asking plan sponsors for all their 408(b)(2) disclosures. This likely means we'll be dealing with the ramifications for a long time." (The Principal Blog)
[Official Guidance] May 23 IRS Phone Forum to Discuss '403(b) Corrections and Examination Trends'
"A discussion on Revenue Procedure 2013-12 will include guidance on correcting 403(b) plan failures and updates to the Employee Plans Compliance Resolution System.... Monika Templeman, director Employee Plans Examinations ... will review issues found in recent 403(b) audits and correcting 403(b) plan failures. If you have a specific matter that you'd like addressed, please email ep.phoneforum@irs.gov by before May 21." (Internal Revenue Service)
IRS Makes Employers' Internal Controls a Priority in Employee Plan Audits (PDF)
"IRS agents now begin their focused audits by asking questions about the plan sponsor's internal controls so they can quickly size up the situation and set the scope of the audit. If a plan sponsor can show checks and balances in key areas of plan operations that the IRS has identified as prone to error, then the IRS does not need to spend its time and limited resources to expand the examination[.]" (Bloomberg BNA Pension & Benefits Daily)
[Official Guidance] Updated IRS Publication 4286 (SARSEP Checklist) and New SARSEP Fix-It Guide (PDF)
"Every year it is important that you review the requirements for operating your Salary Reduction Simplified Employee Pension (SARSEP) plan. Use this checklist to help you keep your plan in compliance with many of the important rule" (Internal Revenue Service)
Retirement Plan Audits for Form 5500 Filings
"What is the rule for audits? ... How is the participant count determined? ... What will the auditors do to prepare their reports? ... When will the audit take place? ... How much will the audit cost?" [Editor's note: Includes a checklist designed to help prepare for a plan audit.] (Benefit Resources, Inc.)
A List of Form 5500 Audit Triggers for Retirement Plans
"[Recently] an IRS official responded to a question regarding which responses on the Form 5500 will increase the likelihood of audit.... [1] Line items that are left blank when the instructions require an answer.... [2] Inconsistencies in the data disclosed on the Form 5500 schedules.... [3] A large drop in the number of participants from one year to the next... [4] A large dollar amount in the 'Other' asset line on the Schedule H." (SunGard Relius)
[Official Guidance] IRS 'Retirement News for Employers' (March 18, 2013 Edition)
Topics include 403(b) correction procedures, a discussion with the EP examination director, self-correction of plan errors, and 2012 reporting reminders for Roth IRA rollovers and conversions. (Internal Revenue Service)
[Official Guidance] Handouts from IRS Phone Forum on International Issues Involving Retirement Plans in U.S. Territories, March 21, 2013 (PDF)
Topics include: FYI 2013 Initiatives; Audits in Puerto Rico; and Application of Income tax requirements to U.S. Virgin Islands. (Internal Revenue Service)
ESOPs Feel Heat from Campaign Against Abuses
"A Department of Labor push to curb employee stock ownership plan abuses is catching more plan sponsors and their fiduciary consultants for a variety of transgressions. Those transgressions include overvalued stock, ill-timed stock purchases, conflicts of interest and outright plan mismanagement.... 'The number of lawsuits in the past six months is unprecedented,' [said] J. Michael Keeling, president of the ESOP Association in Washington[.]" (Pensions & Investments)
[Guidance Overview] IRS Relief Available until April 1 for 403(b) Plan Sponsors Under Audit
"Though plans under audit typically cannot voluntarily correct plan errors (and must pay a higher penalty to correct those errors), plan sponsors availing themselves of the transitional relief will pay only the reduced penalty that applies to voluntary corrections under [EPCRS].... The recent IRS announcement expanded this transitional relief to 403(b) plan sponsors that are audited or notified of a 403(b) plan audit between now and April 1, 2013.... [T]he VCP program is generally unavailable for plans under audit." (McDermott Will & Emery)
Recent Changes to the IRS Employee Plans Compliance Resolution System
"[T]he IRS has added new methods for calculating corrective contributions for employees who are improperly excluded from safe harbor 401(k) plans, 403(b) plans and SIMPLE IRA plans.... The IRS will process applicable fees by converting submitted checks into electronic fund transfers, which require less time to process. A plan sponsor must therefore be sure that sufficient funds are readily available in its checking account before issuing a check for the VCP fee." (Perkins Coie LLP)
[Guidance Overview] EPCRS Provides Flexibility for Unlisted Failures and Corrections
"One of the most important things EPCRS (Rev. Proc. 2008-50) gives us is a list ... of common failures and how to correct them.... But EPCRS gives us something else as well: flexibility. The plan can correct an eligible failure even if it is not on the list. Even if the failure is on the list, the plan can follow a different correction methodology. The list is essentially a set of safe harbors, but the ability always exists to fashion an alternative, although without any assurance that the IRS will accept that alternative unless the plan administrator files under VCP." (SunGard Relius)
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Take your career to the next level with APA/APR designations. Professionals with an ERPA designation automatically receive the APR designation upon joining NIPA and are eligible to obtain the APA by taking a comprehensive online exam. Enroll today. (National Institutte of Pension Administrators)
Reported Probe Into Stable-Value Fund Could Upend Advisers
"A reported inquiry by the [DOL] into a JPMorgan Chase & Co. stable-value fund could put financial advisers in the cross hairs.... The [DOL] could be examining whether the fund holds investments that are inappropriate and whether such risks were disclosed, according to Reuters. Reuters noted that the JPMorgan Stable Asset Income Fund once held as much as 13% of its assets in private-mortgage debt that is rated and underwritten by the firm. That weighting has been reduced to 4%." (Investment News; free registration required)
401(k) Plans, International Plan Compliance Among 'Hot Issues' for IRS
"The 401(k) plan compliance area and international issues are among the top priorities for IRS Employee Plans Examinations (EP Exams), Monika Templeman, director, EP Exams, said [at a recent conference] ... In 2010, the Employee Plan Compliance Unit (EPCU) sent out a comprehensive questionnaire to approximately 1,200 401(k) plan sponsors. 'The questionnaire was so comprehensive that it actually is a really good review of the issues that can be raised in 401(k) plans,' said Rhonda Migdail, EP Technical Guidance and Quality Assurance, IRS Office of Employee Plans.... The EPCU sent letters to eight specific geographic areas across the world and found that there is a lack of understanding concerning the need to pay tax on worldwide income, specifically for early distributions subject to the tax." (Wolters Kluwer Law & Business / CCH)
Retirement Plan Trustees Agree to Correct Improper Plan Loans Totaling More Than $1.7 Million
"To resolve a lawsuit filed by the U.S. Department of Labor, a federal judge in Chicago has signed a consent order between the United Employee Benefit Fund in Northbrook and the secretary of labor to amend the United Employee Benefit Fund's governing documents so that they comply with requirements of [ERISA] and the Internal Revenue Code. An investigation by the department's Employee Benefits Security Administration found that the fund's trustees made loans to participants that were improper, unsecured and allowed to become delinquent. Pursuant to the consent order, the amount of the improper loans -- totaling more than $1.7 million -- will be subject to corrected loan documentation, repaid by plan participants or treated as taxable distributions." (Employee Benefits Security Administration)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
What is the effect of the recent Advisory Opinion on audits for open MEPs? (BenefitsLink.com)
[Official Guidance] IRS Employee Plans News, June 8, 2012 Edition (PDF)
Articles include: highlights from a March 30 phone forum on the determination letter program; how exam agents are handling 403(b) written plan failures; issues found in defined benefit plan audits for PPA 2006; and an upcoming June 12 phone forum on operating under the written plan requirements and common issues identified in 403(b) plans. (Internal Revenue Service)
Government Agency Auditors: Not the 'Dark Side' After All
"Benefit professionals often view the Department of Labor and the Internal Revenue Service as the 'dark side' of benefits, to be avoided at all costs. After all, they dole out penalties and conduct audits. [The author] recently spent two full days at a DOL-sponsored health benefits law compliance assistance workshop in Chicago ... Maybe it was meeting the representatives and understanding that they're real people with jobs and bosses just like the rest of us. Maybe it was the five-pound box of materials bestowed on attendees.... [The author is] now convinced that they are not the enemy. In fact, they are allies on a mission -- to remove barriers to compliance." (HighRoads)
IRS Page on Correcting Plan Errors: VCP Submission Kits for Pre-Approved Plans
"[The page provides links to [1] Pre-approved defined benefit plans -- sponsors who missed the April 30, 2012, EGTRRA plan adoption deadline; [2] Pre-approved 401(k) profit sharing and other defined contribution plans -- sponsors who missed the April 30, 2010 EGTRRA plan adoption deadline[.]" (Internal Revenue Service)
[Official Guidance] Did Your DB Plan Miss the April 30, 2012 EGTRRA Amendment Deadline? IRS Web Site Describes Correction Needed
"Generally, if you have a pre-approved defined benefit pension plan document and you did not sign an EGTRRA plan document by April 30, 2012, your plan does not comply with the tax laws and may be ineligible for tax benefits.... When completing Schedule 2, Part 1 [in the IRS Voluntary Correction Program Submission Kit], go to the �Other� box at the end of the list of law names. Check this box and type in the following failure description: The changes required by the 2006 Cumulative List (Notice 2007-3, 2007-1 C.B. 255) for an employer using a pre-approved defined benefit plan who failed to adopt the pre-approved plan by 4/30/2012, as required by Announcement 2010-20[.]" (Internal Revenue Service)
DOL Ramps Up 401(k) Plan Provider Examinations
"Over the last 12 months, [DOL] has quietly ratcheted up its examinations of firms that serve retirement plans, including brokerage firms, registered investment advisers and third-party administrators, said attorneys representing these firms. [DOL] is examining how these companies get paid and whether their compensation poses a conflict of interest, they said. A Labor Department spokesman confirmed the examinations and said the effort is part of bigger push by the agency to examine all areas of employee benefits, including health and welfare plans." (The Economic Times)
[Official Guidance] Using the IRS' Voluntary Correction Program to Correct Errors Discovered During a Determination Letter Application
"[Question:] Can I reserve the right to use VCP to correct errors found during the determination letter application process by including a disclaimer in the application, stating, for example, that 'I elect to be treated under the VCP program if the IRS finds an error?' [Answer:] No.... [that] statement wouldn�t be acceptable because it�s too broad and fails to describe a specific error." (Internal Revenue Service)

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