Who Do You Want Auditing Your Retirement Plan?
Do you have a qualified retirement plan such as a 401(k), profit sharing plan or other defined contribution plan covering your employees? If so, did you know your plan and the transactions entered into by it are subject to review by both the Internal Revenue Service (IRS) and Department of Labor (DOL)?
In our experience, many plans are being operated and administered in a way that is not consistent with the plan documents. Failure to administer plans in accordance with the plan documents can result in penalties and possible plan disqualification. Even if you outsource plan administration, in most cases, employers remain responsible for plan administration even if a service provider is hired. Some of the questions you should ask about your plan include:
- Has your plan participated in a prohibited transaction? Reviews and determinations that prohibited transactions are present are on the rise. Many plans inadvertently engage in prohibited transactions, but there is no distinction between intentional and inadvertent prohibited transactions for most penalties that may be imposed. Penalties are significant and your plan can be disqualified. If a prohibited transaction is identified and corrected prior to DOL audit, some of these penalties can be avoided.
- Is your plan in compliance with all employee notification requirements, including provision of Safe Harbor Notices, if applicable, Summary Plan Descriptions and updates, Summary Annual Reports and self direction and other investment related information and notices? The requirements to comply with self direction are onerous and difficult to meet. Employee lawsuits in such area are on the rise.
- Are your plan documents and all related forms up to date? Have you made all necessary plan amendments and restatements for your plan to maintain a qualified status?
- Is your plan’s insurance coverage sufficient? Fiduciary fidelity bonds are often required. Levels of coverage may vary based on the investments held by the plan. Fiduciary liability insurance is also advisable.
- Is your plan in compliance with the latest regulations on disclosures concerning investment expenses?
- Is your plan covering the appropriate employees? Are proper contributions, including minimum contributions required if your plan is “top-heavy”, being provided to participants? Failure to cover the appropriate employees, and contribute the correct amount, can result in costly corrective contributions, including lost earnings on those contributions.
Compliance with the laws applicable to retirement plans is crucial due to the various civil and criminal liability provisions under the Employee Retirement Income Security Act of 1974, and in DOL and IRS regulations. The IRS and DOL each offer various procedures for correcting plan errors; however, the cost is generally less and the availability for self-corrective procedures are more likely if errors are identified prior to an audit.
To assist you in reviewing and assuring you are in compliance, Vandenack Weaver LLC has developed retirement plan audit services. Vandenack Williams LLC will review your plan documents and administrative procedures to help you identify any issues that need to be resolved before the IRS or DOL visits. Our firm offers varying levels of audits at flat fee prices. The specific fee depends on your plan type and the scope of the review.
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