EisnerAmper Blog

The Compensation and Benefits Blog

IRS Expands Ability to Make Safe-Harbor Plan Amendments

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June 21, 2016 

By Peter Alwardt, CPA

IRS Notice 2016-16 provides that a mid-year amendment to a safe-harbor retirement plan or safe-harbor notice will not violate safe-harbor rules.

Safe-harbor rules require a plan sponsor to make minimum, fully vested contributions. The sponsor must provide a notice explaining the safe-harbor provisions to plan participants at least 30 days prior to the beginning of any plan year in which it intends to make safe-harbor contributions. Previously, once plan sponsors provided the notice to participants, they could not amend their safe-harbor plan mid-year except under certain circumstances.
New Guidance

Under Notice 2016-16, a mid-year change is considered a change that is first effective during the plan year, but not effective as of the beginning of the plan year; or one that is effective as of the beginning of the plan year, but not adopted until after the beginning of the plan year.
If the mid-year change modifies the content of a plan’s safe-harbor notice, then the plan sponsor must issue an updated safe-harbor notice 30-90 days prior to the change becoming effective. Each employee that is required to receive a safe-harbor notice must also be given a reasonable opportunity after the receipt of the updated notice and before the effective date of the mid-year change to alter the participant’s salary deferral election.  A reasonable opportunity is considered at least 30 days.

Mid-year changes are now allowed. However, these mid-year changes are specifically prohibited by the IRS:
  • Increasing an employee’s required number of completed years of service.
  • Reducing the number of employees eligible to receive safe-harbor contributions.
  • Changing the type of safe-harbor plan.
  • Modifying how the plan determines matching contributions.
These changes should help make safe-harbor plans more attractive to employers. However, plan sponsors wishing to make mid-year changes to plans must be aware of the rules for updating the safe-harbor notices to plan participants as well as mid-year modifications to plans.

The SIMPLE Retirement Plan Gets Simpler

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June 3, 2016

By Peter Alwardt, CPA  

Savings retirement plans have certainly helped many people sleep better at night. There is currently more than $24 trillion in retirement assets in the U.S. However, one criticism with retirement plans has been a certain lack of flexibility. Thankfully, that changed for the better recently.  

Previously, a SIMPLE plan could only accept rollover contributions from another SIMPLE plan. (SIMPLE plans are retirement vehicles for small business owners and their employees.) However, this rule has changed under the 2015 Consolidated Appropriations Act. A participant in a SIMPLE plan who has participated in it for at least two years may now rollover distributions received from other qualified retirement plans [e.g., 401(k), 403(b), or governmental 457] to their SIMPLE plan account. The employer that sponsors the SIMPLE plan must verify that the participant has met the two-year participation requirement in order to make the rollover. 

An employer that does not sponsor another qualified retirement plan and has less than 100 employees can sponsor a savings incentive match plan for employees (SIMPLE plan) without being subject to most of the requirements imposed on qualified retirement plans such as nondiscrimination testing. 

So just what are the benefits of this change in the law? Employees can consolidate and better track their retirement investments and quite possibly save money on plan fees. As for small business owners, they now have another benefit in their toolbox to help retain employees or attract new ones.   

U.S. Retirement Assets
(in trillions of dollars)
2014 $24.7
2012 $20.1
2010 $18.2
2008 $14.2
Source: Investment Company Institute


DOL Contacts Plan Sponsors with Tips on Selecting a Plan Auditor

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December 9, 2015

Wasser_DianeBy Diane Wasser, CPA

In late November 2015, the Department of labor (“DOL”) began an “email campaign” which involves sending emails to ALL plan administrators and impressing upon them the importance of selecting and monitoring the auditor of their employee benefit plans. You may think that auditors of plans would be unhappy with that -- but at EisnerAmper, we LOVE IT! We fit the mold of a quality auditor. We have procedures in place to stay ahead of what is hot in the area, train our staff exceptionally, and keep our position as an exceptional plan auditor and firm.  

The email caption is “Tips for Selecting and Monitoring a Plan Auditor” and the contents note that “Selecting a qualified CPA who has the expertise to perform an audit in accordance with professional auditing standards is a critical responsibility in safeguarding your plan’s assets and ensuring your compliance with ERISA’s reporting and fiduciary requirements.”  


The email lists certain criteria a plan sponsor might consider in a plan auditor, certain of which are below. Please see our added commentary in bold italics about how EisnerAmper sizes up against the DOL’s recommendation:


  • The number of employee benefit plans the CPA audits each year, including the types of plans. EisnerAmper audits over 400 plans annually including defined contribution, defined benefit, health & welfare, 403(b), and employee stock ownership plans. 

  • The extent of specific annual training the CPA received in auditing plans. EisnerAmper provided over 48 hours of benefit-plan-specific continuing professional education to more than 200 professionals thus far in 2015. 

  • Whether the CPA has been the subject of any prior DOL findings or referrals, or has been referred to a state board of accountancy or the American Institute of CPAs for investigation. EisnerAmper has been selected for review twice by the DOL in the past 4 years as part of their standard practice and we received zero comments; the DOL did not note any audit areas where they believed there were substandard audit procedures; and we have not been referred to a state board.


IRS to Focus on Audits of 403(b) and 457(b) Plans

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November 3, 2015

By Peter Alwardt, CPA

The IRS Commissioner of the Tax Exempt and Governmental Entities group has announced the fiscal year 2016 (10/1/15 – 9/30/16) employee plans examination priorities.  Included in the priorities is a specialty program which will focus audit resources on Internal Revenue Code section 403(b) and 457(b) plans. 

Not-for-profit organization sponsoring section 403(b) plans and governmental organizations sponsoring section 457(b) plans should be reviewing their plans now for operational issues and consider making corrections under the available IRS programs before their plan is subject to audit in order to help avoid potential penalties being assessed by IRS.

In reviewing plans for potential operational issues, we recommend plan sponsors consider the following areas:

  • Plan Documents – Consider whether the procedures currently being practiced in regard to eligibility, compensation, contributions, etc. are following the plan document.
  • Contributions – Compare total contributions to the prior year and as a percentage of payroll. Are there any anomalies? Also consider the timeliness of contributions throughout the year. Were funds put into the plan on the “earliest date possible?”
  • Compensation – Review your plan document to determine the definition of compensation and consider whether there were any extraordinary wages paid (bonuses, etc.). Determine whether employee contributions were withheld from those extraordinary wages and whether that is appropriate based on the Plan document.
  • Eligibility – Consider employees that joined the company during the year. Were they given an opportunity to enter the plan at the appropriate time?

The years that will likely be subject to examination by the IRS will be the 2013 and 2014 plan years, so we recommend beginning your review of those plan years.

If issues arise that you think may cause operational defects in the plan, please speak to your benefits professional  for assistance in correcting the error through the IRS’ Voluntary Compliance Program.

Simplification of Employee Benefit Plan Disclosures

(Defined Benefit Plans) Permanent link

June 6, 2016

By Denise Finney, CPA

Great news!  New accounting pronouncements were recently issued to simplify disclosures for employee benefit plans. In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-12 (“ASU 2015-12”) in three parts:

Part I - Fully Benefit-Responsive Investment Contracts,
Part II - Plan Investment Disclosures, and
Part III - Measurement Date Practical Expedient.

The ASU amends Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), and Health and Welfare Benefit Plans (Topic 965). 

Part I designates contract value as the only required measure for fully benefit-responsive investment contracts with regards to defined contribution pension plans and health and welfare benefit plans. The amendment eliminates the requirement to present an adjustment to reconcile contract value to fair value on the face of the financial statements. Disclosures regarding the nature and risks of fully benefit-responsive investment contracts are still required.
Part II simplifies investment disclosure requirements for both participant-directed investments and non-participant directed investments. The amendment eliminates the disclosure of investments that represent 5% of more of net assets available for benefits, net appreciation/depreciation for investments by general type, and disaggregation of investments by nature, characteristics and risks. In addition, if an investment is measured using the net asset value per share as a practical expedient and that investment is a fund that files Form 5500 as a direct filing entity, there is no longer a requirement to disclose the investment’s significant investment strategy.
Part III allows an employee benefit plan with a fiscal year-end that does not coincide with the end of a calendar month to measure its investments using the month-end closest to its fiscal year-end.

The amendments are effective for fiscal years beginning after December 15, 2015. Earlier application is permitted. The amendment is applied retrospectively to all periods presented.

Plan sponsors should consider the effect of the amendment on their employee benefit plan financial statement disclosures as a way to simply disclosures.





Alternative Investments in Employee Benefit Plans – Part 2

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August 10, 2015

Wasser_DianeBy Diane Wasser, CPA

The final installment in a 2-part series

Last week, we posted
Part 1  of a series focused on the current trend of employee benefit plans looking at alternative investment strategies for plan investment decisions. Here are two more critical concerns beyond the investment risk and performance.

Plans with direct ownership in certain investments – Certain investments generate unrelated business income and may obligate a plan to file Form 990-T and pay tax to the IRS. Care should be taken to determine whether there are federal and/or state unrelated business income tax liabilities being generated by the holding of certain investments. 

Plans with direct ownership in foreign investments – In addition, certain U.S. tax forms may be required to be filed to report foreign investments to the IRS (including, but not limited to, Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, which is filed by way of attachment to Form 990-T, even in cases where Form 990-T may not be applicable). State filings may apply as well. Noncompliance with these filing requirements may result in potentially onerous penalties for any current and prior years. For instance, if a plan holds a direct interest in a foreign corporation and invests $100,000 or more in a year, it may trigger an IRS filing requirement. One way to remedy past noncompliance with these filing requirements is to enter into the currently available Internal Revenue Service Offshore Voluntary Disclosure Program (“OVDP”). This may result in the abatement of related penalties for non-filing, including, but not limited to, the lesser of 10% of the investment’s fair market value or $100,000 per year for non-filing of Form 926. The OVDP could change or terminate at any time, so timely addressing any direct foreign investments posing exposure is encouraged.

These filings are often required for investments in many defined benefit plans as more and more plan sponsors are diversifying into foreign investments.

Alternative Investments in Employee Benefit Plans

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August 6, 2015

Wasser_DianeBy Diane Wasser, CPA

The first post of a 2-part series.

Many plan sponsors are revisiting investment strategies historically employed when making investment decisions. As a result, employee benefit plans are holding more alternative investments, or investments without a readily determinable fair market value such as common collective trusts (“CCT”), pooled separate accounts (“PSA”), hedge funds and limited partnerships. As long as the plan document allows for such investments, decisions to revise a plan’s investment policy to add alternative investments are appropriate. However, plan sponsors will benefit from considering the following in addition to considering the investment risk related to alternative investments: 

Investment selection and ongoing due diligence – The criteria for evaluating alternative investments requires expertise that may be historically unavailable to plan sponsors, therefore additional investment advisors may be necessary. Once an investment is made, ongoing due diligence serves to assure the investment continues to meet the plan’s needs, and this ongoing task varies by investment type.

Supporting documentation – Such investments typically have specific underlying contracts that require signature by plan management. When signing such contracts we recommend great prudence, including careful review of contract terms affecting the plan as well as the plan sponsor company and implementing a policy to maintain signed copies. Terms may also include commitments to invest additional amounts in the future.

Liquidity of the investment – Many such investments impose restrictions on the frequency of liquidations, as well as restrictions prohibiting liquidation of the investment for a certain period of time after the initial investment is made. Both of these restrictions can be very challenging, especially in the employee benefit plan area where the priority is to pay benefits when due.

Determination of fair value – Determining the fair value of certain alternative investments, including CCTs, PSAs and hedge funds, is less cumbersome than others as such investments report a net asset value that can be used as a practical expedient to determine the fair value. The ability to obtain and transact at the net asset value is especially important for plan’s requiring an annual financial statement audit. Certain investments operate on a reporting delay whereby the alternative investment is unable to provide year end values in a timely fashion and thus plan custodians reporting data on the alternative investment may have values of one to three months prior to the plan’s year-end. This timing can be challenging as plan reporting on form 5500 is as of the plan year-end.

EisnerAmper is an independent member of Allinial Global.
EisnerAmper is an independent member of EisnerAmper Global.