Audit Communications and DOL UpdateNovember 19, 2014

By: Stan Bowles, CPA

Bio

• Partner with Brown, Edwards & Company, LLP

• Tax, healthcare, consulting and EBP services

• 20 years of experience

• BE is the 124th largest US firm out of 330,000

• 7 office locations and 200 employees

• Firm is a member of the AICPA EBPAQC

• Firm performs over 100 EBP audits per year

• Firm also provides TPA services and assists with

plan designs and documents

Discussion Topics

• Role of regulators (DOL and IRS)

• Plan sponsor responsibilities

• Employee benefit plan examination process

• Plan sponsor compliance and preparation

• Correcting plan errors

• Hot topics

• Questions

Roles of Regulators

• IRS has primary jurisdiction over qualified plans,

which includes examining plans and processing

requests for determination letters.

• Department of Labor (DOL) has primary

jurisdiction over the fiduciary standards,

reporting and disclosure requirements and other

rules.

Plan Sponsor Responsibilities

Keeping the plan in compliance:

• Plan document written to comply with all

requirements of the IRC.

• Plan administered to follow the terms in

operation.

• Review the plan annually to make sure it’s

operating according to its terms and the law.

Examination Process

• Very structured process

• The IRS even provides a flow chart of the

process!

Examination Process

Key focus areas include:

1. Eligibility, participation and coverage

2. Vesting

3. Discrimination

4. Top heavy requirements

5. Contributions and benefit limits

Examination Process

6. Funding and deductions

7. Distributions

8. Trust activities

9. Plan and trust documents

10.Returns and reports

Compliance & Preparation

Top 10 tips to prepare for an efficient audit

1. Have readily available: Plan documents, including amendments, SPD, etc.

Opinion letters/determination letters

Requested records efficiently organized

Agreements with service providers

2. Have appropriate people available Trustee, custodian, attorney, etc.

3. Be prepared to explain terms of the plan

Compliance & Preparation

Top 10 tips to prepare for an efficient audit

4. Be prepared to explain operation of the plan Administrative forms (deferral agreements, etc.)

Loan and hardship documentation

5. Be prepared to provide all applicable test

results

6. Be prepared to explain internal administrative

processes Practices and procedures (payroll, remittances)

Internal controls

Compliance & PreparationTop 10 tips to prepare for an efficient audit

7. Be prepared to identify plan errors

8. Be prepared to provide information about related employers/entities

9. Consider utilizing annual self-audit as a verification tool (small plans not subject to audit)

10.Consider utilizing available IRS resources

Compliance & Preparation

So how can I keep up with compliance and be

prepared?

• IRS 401(k) plan checklist (other plan types also

available)

• 401(k) Plan Sponsor fiduciary audit file checklist

(RBC Wealth Management as an example)

Correcting Plan Errors

The Employee Plans Compliance Resolution System (EPCRS) provides for 3 types of programs for correcting plan errors:

1. Self-correction program (late deferral payment remittance corrected with form 5330)

2. Voluntary correction program (failure to get plan audited and not yet notified by IRS of audit requirement)

3. Audit closing agreement program (errors fixed as result of IRS or DOL audit)

Hot Topics

• Plan amendment requirement for same sex

marriages – Windsor case – amendments

required by 12/31/14 if the plan defines spouse

as member of opposite sex and/or the plan

wishes to refer to the outcome of Windsor case

• Disclosure of plan fees – applicable for 2013

• 2015 changes – Eligible comp increased to

$265,000; deferrals increased to $18,000;

catch-up contribution (50 and older) increased

to $6,000

Questions

Contact Information

Stan Bowles, CPA

Partner

Brown, Edwards & Company, L.L.P.

P.O. Box 16999

Bristol, VA 24209-6999

Phone number: 276-466-5248

E-mail address: sbowles@becpas.com

Website: www.becpas.com