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Is Keeping Former Employees in Your Plan a Good Idea?

"[F]ormer employees with balances of $5,000 or less may actually cause the plan to incur an unnecessary audit fee, adding administrative difficulty, and potentially increasing fees per participant paid to the custodian and third-party administrator.... [O]ther issues to consider regarding potentially lost participants include how up-to-date are the addresses of the former employees in the plan? Are they still living the United States or even alive? What are the escheatment laws in your state? At what point does the account become abandoned?"

401(k) Contribution Limits: A Walk Down Memory Lane

"[T]he 401(k) plan has become the primary tax-deferral retirement savings vehicle in the United States... [This article looks] at the historical limits [to] see how they have evolved from allowing employees to defer up to the annual addition limit to limiting employee contributions to a portion of the permitted contribution total, then gradually increasing the gap between the total contribution limit and the deferral limits."

Proposed Statement of Auditing Standards: Redesigning the Audit Reporting Model for ERISA Plan Financial Statements

"In addition to changing the form and content of limited scope audit reports to better explain the auditors' responsibilities, the proposed SAS requires the auditor to report findings from procedures performed on specific plan provisions that affect the financial statements."

Hardship Distributions: Source Documents vs. Documentation of Self-Certification by Participants

"If the third-party administrator is obtaining a summary of the information contained in the source documents, it should provide a report or other access to this data to the employer at least annually, describing the hardship distributions made during the plan year.... Hardship distributions issued in prior years should be reviewed to ensure that either the old rules or the new rules were followed."

Benefit Plan Self-Audits

"There are certain mistakes ... that regulatory authorities say cause the most compliance issues. To manage your resources wisely, consider focusing on the following high-risk areas. [1] Timeliness of deposits ... [2] Not following plan provisions ... [3] Over-Reliance on Service Providers ... If you do all of these steps in your self-audit, document it in an Excel spreadsheet and save the information in the retirement plan file. If you ever do get audited you can show the IRS or DOL the steps you performed and this will show them you are trying to do everything you can to ensure compliance."

The Aftermath of DOL's Assessment on the Quality of Financial Statement Audits

"6,806 of the 7,330 firms (93% of the audit firms) that audit retirement plans audit fewer than 25 plans. If your auditor falls in these categories, there is approximately a 70% chance that your plan audit is in some way deficient.... The question becomes how does a plan sponsor find an auditor that provides the most value for every unsatisfying audit dollar expended?"

How to Refinance Participant Loans

"Every so often, a sympathetic plan sponsor who wants to help with its employees who need financing for reasons that don't meet the hardship distribution requirements, endeavors to tackle the complexities of allowing two participant loans and/or offering participant loan refinancing. The rules can be tricky, but they are not difficult for those unafraid to take a couple of extra steps."

Using EPCRS to Correct Participant Loan Issues

"Plan failures related to participant loans can be corrected using either Voluntary Correction Program (VCP) or Correction on Audit. Since plan loan failures are not operational failures, they cannot be corrected using the self-correction method.... [P]ossible failures related to participant loans ... include: [1] Plan loans in excess of the maximum limit ... [2] Loan terms do not satisfy repayment requirements ... [3] Loan defaults due to repayments that are not in accordance with the loan term"

The Paradox of Participant Loans in Default: A Taxable Distribution of a Loan Balance Still Considered to Remain Outstanding

"[K]eeping two sets of books is sometimes a legitimate practice, required precisely to comply with IRS rules that regulate different aspects of each set of books. For example, the difference between deemed distributions of loans in default and the actual loan offset requires a double set of books.... The first set of books is needed to comply with the taxable distribution rules and the second one to comply with the top-heavy test and the maximum available loan computations."

Dispelling an Urban Legend: Participant Loans Do Not Result in Double Taxation

"If a plan participant needs a loan and takes a loan from the plan, or from a bank, or from a relative, the loan repayment is always made with after-tax dollars. Please note that loan proceeds are generally not taxable. If the loan repayments to a retirement plan were made with pre-tax dollars, the participant would effectively get TWO tax deductions or tax deferrals for only one distribution that will be taxable."