Aug 07, 2015
4/23/2015
4/23/2015
How to Avoid 401(k) and Pension Plan Disasters
Presented by:Dan Sturm, Principal
Shalane Cohen, Senior ManagerDanielle Guinter, Senior Manager
INTRODUCTIONS
Dan Sturm, CPA• Principal • Employee Benefit Plan
Audit Services Coordinator
• Key leader of the firm’s external audit segment
Shalane Cohen, CPA• Senior Manager• Key member of the
firm’s audit practice• Performs employee
benefit plan audits and serves manufacturing and nonprofit clients
Danielle Guinter, CPA, MAcc• Senior Manager• Performs employee benefit
plan audits and serves construction and manufacturing clients
• Learn how you, your management, and your HR team can prevent some of the costly mistakes associated with running your 401(k) and pension plans• Learn the steps to take when sponsoring a retirement plan to avoid
problems down the road• Learn what to do when you come across a problem that has
already happened.
OBJECTIVES
• Employee Benefits Security Administration (EBSA)authority • EBSA recoveries • Investigations • Indictment
2014 DOL STATISTICS
• Failing to operate the plan prudently and for the exclusive benefit of participants;• Using plan assets to benefit certain related parties to the plan, including the plan
administrator, the plan sponsor, and parties related to these individuals; • Failing to properly value plan assets at their current fair market value, or to hold plan
assets in trust; • Failing to follow the terms of the plan (unless inconsistent with ERISA); • Failing to properly select and monitor service providers.
ERISA CIVIL VIOLATION EXAMPLES
•Major Case Enforcement
• Employee Contributions Initiative
DOL NATIONAL ENFORCEMENT PRIORITIES
• Contributory Plans Criminal Project• Fiduciary Service Provider Compensation
Project• Rapid ERISA Action Team• Employee Stock Ownership Plans• Voluntary Fiduciary Correction Program
DOL NATIONAL ENFORCEMENT PROJECTS
• Auditor Selection
• Plan Document & Summary Plan Description
• Plan Operations
STRAIGHT FROM THE DOL
CASE #1 - CHURCH PLANS
Overall v. Ascension & Kaplan v. Saint Peter’s Healthcare Sys.
Overall decision in 2014 back in favor of church-affiliated organizations, church plans not established and created directly by a church.
CASE #2 – SERVICE PROVIDER
Benefit Consultants, Inc. 3/18/14
• During 1998 to 2013 Ricky Lynn Richardson stole approximately $4.3m from 4 pension plans.• Provided administrative services.• Misdirected or misappropriated money and provided customers with false
investment statements.
CASE #3 – SERVICE PROVIDER
Advanced Administration, Inc. 6/3/14
• TPA responsible for processing member payments and paying plan bills.• Wrote 46 checks from the plan totaling $427k to individuals that were not
members of the plan.
CASE #4 – EXECUTIVE CHAIRMAN
Innovative Logistics Technology, Inc. 9/11/14
• Head of defense contracting company.• Theft of more than $186k from plan.• Withheld amounts from employee paychecks and never contributed the
amounts to the investment accounts.• Purchased an executive suite at FedEx Field and also sponsored the Virginia
Gold Cup.
CASE #5 – TRUSTEE & FIDUCIARY
G Fiduciary (G Fid) Retirement income Security Plan 7/31/13
• Misappropriated over $5m of assets from 2 plans for personal use.• On 12 occasions directed the record-keeper to wire transfer plan assets at Charles
Schwab to accounts he controlled.• Renovated personal residence, built a pool, bought cars, ATV’s, motorcycles, and a tractor.• On a separate occasion directed another record keeper to wire $3m to an escrow account
and also directed the record keeper to describe the transaction as a fixed income bank note.
IRS FOCUS ON INTERNAL CONTROLS
Monika Templeman, director of Employee Plans Examinations at the IRS stated:
If a plan is selected for audit by the IRS, the EP agent conducting the retirement-plan examination will begin by evaluating the effectiveness of the plan’s internal controls to determine whether to perform a focused audit – that is, just look at three to five issues – or expand the scope of the examination. In other words, based on the strength of the plan’s internal controls, the agent will decide to examine more or less of the return than originally planned.
INTERNAL CONTROL
The IRS recommends ensuring internal controls include procedures for: • Plan operations review
o Verify that the plan is operated according to written terms
• Plan document updateso Meet with service providers to see if the plan document needs updating for
law changes or changes in plan operations
COMMON MISTAKES
Updated December 2014 as a result of communication problems between the plan sponsor and TPA• Failure to timely amend the plan or follow the terms of the plan • Failure to review in-service, termination and loan distribution forms to
make sure they follow the plan terms• Failure to count all eligible employees in testing
5500 ERRORS
• Results of IRS Fraud Projecto Weak internal controlso Selected in error ?????
• Pension feature codes• Incorrect # of plan participants• Errors related to termination of a plan
HOW TO CORRECT
First determine type of error
• Plan Document Failure o Recommend guidance of an ERISA attorney
• Operation Errorso Typically the ones we see
EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM
• Self-Correction Program (SCP) – no requirement to notify IRS; for operational failures• Voluntary Correction Program (VCP) – Operational failures and
some plan document failures• Audit Closing Agreement Program (Audit CAP) – Result of an IRS
audit finding
THANK YOU
Contact us at:
Dan Sturm Shalane Cohen Danielle [email protected] [email protected] [email protected]
4/23/2015
4/23/2015
4/23/2015
4/23/2015