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During May 2015, the U.S. Department of Labor (“DOL”) published its study on the quality of the benefit plan audits performed by the CPA community. Such report revealed “serious issues” with the results and the system itself. The study, performed for the plan year 2011, reveals that 39% of these audits were substandard whereas they did not comply with professional audit standards (“GAAS”). The study noted “unacceptable-major deficiencies with….GAAS requirements, putting $653 billion dollars and 22.5 million plan participants at risk”. This substandard rate was an increase from the last three similar studies performed whereby the substandard rates were 23% […]

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Pension Audit Plan Decision Tree More [+]

Employers must contribute participant elective deferrals and participant loan payments to a defined contribution pension plan in accordance with the terms of the plan, if the plan document includes language about the timing of deposits, and in accordance with Department of Labor (DOL) rules. Not complying with the terms of the plan is considered an operational failure, which could subject the plan to civil penalties and even worse potential disqualification. This can be corrected under the IRS Employee Plans Compliance Resolution System (EPCRS). But, this type of mistake can also lead to a prohibited transaction. A prohibited transaction cannot be […]

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Participants make the following mistakes when managing their 401(k) account balances: Not reviewing fee structure of funds selected for investment Failing to re-balance investments on a regular basis Not taking advantage of employee deferrals or employer matching programs for contributions Changing jobs and closing out a retirement account and paying a tax penalty , instead of rolling over the funds to their new employer’s plan or an IRA account Not allocating among different types of investments (stocks, bonds, commodities and cash) or leaving too much money in low interest accounts Numerous trades on individual securities Taking loans against their account […]

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The plan sponsor and its trustees must institute internal controls to help ensure that the Plan meets its goals and objectives. The goals and objectives include administration of the plan in accordance with regulations and the plan document, and having accurate and complete financial statements prepared in compliance with DOL and IRS regulations. Some general controls over financial reporting are: Accounting procedures that provide for appropriate segregation of duties to reduce the likelihood that fraud can occur. An internal control system that ensures proper authorization and recording procedures for financial transactions. Assign personnel that are qualified to perform their duties. […]

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According to the U.S. Department of Labor, not every CPA firm is qualified to do an employee benefit plan audit. Because this type of audit is so specialized, you should hire a firm that is specialized, too. Below are guidelines that the Department of Labor provides to help in the selection process. Why is the choice of an auditor important? A quality audit will help protect the assets and the financial integrity of your employee benefit plan and ensure that the necessary funds will be available to pay retirement, health, and other promised benefits to your employees. A quality audit　will […]

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If this question made you pause and think, chances are you’re probably not. We can help. Let us supplement your team with our specialized expertise. Many business owners set up an employee retirement plan and think that, once it’s set up, it can take care of itself. Unfortunately, it cannot. Not arranging for plan maintenance or not submitting a qualified, thorough audit can have serious implications to the assets held in their plan and their bottom line. The rule of thumb for whether audited financial statements of the plan are needed is based on the number of eligible participants at the […]

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It’s one thing to talk about the possibility of facing penalties for deficient employee benefit plan Form 5500 return/report filings, but it is quite another to actually pay them. Often, you move through your filings with the general sense that they will go smoothly and without issue. But if you are not completely confident that every ‘i’ has been dotted and every ‘t’ has been crossed, you run the risk of an assessment that not only surprises you but that has serious impact to your bottom line. Although there are a number of penalties that can be assessed for deficient […]

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You thought your employee benefit plan audit would go smoothly. Instead, you got an unanticipated and unwanted surprise. You expected your audit would be completed on time. Instead, you had to pull additional data just before the filing deadline. You hired an auditor you thought could do the job. Instead, you received a letter from the Department of Labor notifying you of the many deficiencies in the audit. Any auditor can say they know employee benefit plans, but if you experienced any of these issues with your recent audit, you know that claim is not always true. And if not careful, a deficient audit could result in significant […]

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Employee benefit plans are under great scrutiny by the DOL. If your plan is not complying with plan provisions or just has errors in its operations there are steps you can take to fix these problems. Generally, if your plan is not currently being audited by the IRS you can apply under the voluntary correction program (“VCP”) with the IRS to correct the errors which if not corrected could result in penalty or even worse, loss of the plan’s tax favored status. The VCP helps bring your plan back into compliance with federal tax law, protects your tax deductions, insures […]

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