EisnerAmper Blog

The Compensation and Benefits Blog

Employee Benefit Plan Oversight

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April 2, 2014

Wasser_DianeBy Diane M. Wasser, CPA

My sense has always been that there are plan sponsors that do not fully understand their fiduciary responsibility for their employee benefit plans. That concerns me. People who are charged with the responsibility to administer an employee benefit plan that is subject to ERISA face consequences that can affect them personally, so they should act with great care.

Through ERISA, the Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”) have authority to issue regulations for employee benefit plans.  The DOL has primary responsibility for reporting, disclosure, and fiduciary requirements; the IRS has primary responsibility for participation, vesting, and funding issues; AND the DOL may intervene in any matters that materially affect the rights of participants, regardless of primary responsibility. 

Both the IRS and DOL have many ways they oversee plans.  One method employed by the IRS is comparing the employer’s contribution to its defined contribution plan (as reported on the Plan’s Form 5500), to the amount deducted on the company’s Form 1120.  Inquiries will take place for differences and employers will be spending time and resources working to support their filings.  In addition, the IRS actually focuses on internal controls in its audits of plans, especially for large plans with 2,500 or more participants.  Internal control is often misunderstood by plan sponsors because they consider the plan’s transaction processing to be an outsourced function for which they are not responsible. Frankly, that is completely wrong.  Plan sponsors are ultimately responsible, even for outsourced activities.  In addition, the DOL examines Form 5500 data and, now that all filings are electronic, the DOL has the ability to run checks and balances on numbers and search for key words, all quickly and efficiently.  My hope is that employers start taking plan sponsorship more seriously.  Maybe I am also being selfish since the more seriously plan sponsors consider their responsibility, the more they see the value of a quality employee benefit plan audit firm.

Time for Your Plan’s Checkup!

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March 21, 2014

DeSaro_BrendaDeAngelo, KristeBy Kriste DeAngelo and Brenda DeSaro

Do you enjoy going to the doctor?  How do you think your 401(k) plan would do under the microscope of a routine checkup?  The employee benefit plan arena is changing frequently just like the health care industry.  Recently, Kriste DeAngelo and Brenda DeSaro wrote an article on assessing the financial wellness of your defined contribution plan, along with compliance areas and fiduciary responsibilities to be aware of. 

Furthermore, EisnerAmper LLP and Morgan, Lewis & Brockius LLP would like to invite you to a seminar titled “How Healthy is Your Defined Contribution Retirement Plan?” on Wednesday, April 23, 2014 at 8:30 am at the Philadelphia Marriott West, West Conshohocken, PA. You can register here

Roth Rollovers

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February 17, 2014

Alwardt_PeterBy Peter Alwardt, CPA 

Prior to 2013, employees were able to roll over 401(k) funds to a designated Roth account in the same plan only if the amounts were eligible for distribution. Beginning last year, plans may now allow rollovers of monies that would otherwise NOT be eligible for distribution. (You can read more about this here: IRS Provides Additional Guidance on In-Plan Roth Rollovers.) This allowance will require the plan to be amended to address these rollovers. Internal Revenue Notice 2013-74 extends the deadline for amendments to allow these rollovers to December 31, 2014, in general, but see the Notice for your specific type of plan.

There are certain restrictions related to how these rollovers are treated in the plan, so plan sponsors should seriously consider the level of utilization by participants before implementing the amendments. The additional administrative costs may outweigh the value of the provision.


Suspending Safe Harbor Contributions During the Plan Year

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February 11, 2014

Alwardt_PeterBy: Peter Alwardt, CPA 

If you have elected to have your retirement plan treated as a Safe Harbor Plan, you may have an option to suspend your contributions to that plan.

Recently, the IRS issued final regulations allowing the reduction and/or suspension of a company’s safe harbor contributions during the plan year if one of the following criteria is met:

  1. The plan sponsor is operating at a loss, or
  2. The plan’s safe harbor notice states that the plan may be amended during the year to reduce contributions, another notice will be given to participants if a reduction occurs and the reduction will not occur until 30 days after that notice is given.

The regulations apply to amendments reducing Safe Harbor nonelective contributions adopted after May 18, 2009 and to amendments reducing Safe Harbor matching contributions adopted after January 1, 2015. For more details on the specifics of these regulations, please visit our full benefits alert: IRS Final Regulations on Suspending Safe Harbor Contributions During the Plan Year.

Defined Benefit Plan OR Defined Contribution Plan? Decisions, Decisions, Decisions…

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January 17, 2014

Wasser_DianeBy Diane Wasser, CPA 

The implementation of an employee benefit plan by a company can stem from many things including employee retention, morale, retirement, competition, etc.  As with any program, there are costs.  Is one less costly than the other?

Most people initially believe that a defined benefit plan incurs more cost to the employer than a defined contribution plan. However, both plans consume a variety of resources.

In a defined benefit plan, generally all funds are employer contributions. Additionally, since the retirement distributions are set at the time of entry to the plan, the employer also assumes the risk of stock market losses on the invested funds.

With 401(k) defined contribution plans, employees are responsible for a majority of the contributions and also assume the market risk of loss. However, employers are responsible for depositing employee deferrals withheld from their pay into the plan on a timely basis, as strictly defined by the Department of Labor.  Such processes take time for the employees at the company responsible for plan administration. The most significant expense for plan sponsors is generally the contribution level required by the employer.  In a 401(k) defined contribution plan allowing employee deferrals, an employer may choose not make a company contribution.

Juggling the employer cost vs. the time commitment of your HR professionals to administer the plan is a balancing act for sure.

Year-End Guide for 401(k) Plan Administrators

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December 23, 2013

By Denise Finney, CPA

Finney_DeniseThe end of the year is quite a busy time.  If you are the administrator of a defined contribution plan, such as a 401(k) plan, your to-do list mostly likely includes ensuring year-end employee contributions, employer match contributions and any additional employer contributions are calculated appropriately and remitted to the plan in a timely manner.  Here are some questions to ask yourself before remitting the last contribution of the year.

  • Did participants receive the proper deferral?  Keep in mind those participants who elected to maximize their contributions or make catch-up contributions
  • Was the correct compensation used to calculate contributions?  Plan administrators should refer to the definition of compensation outlined in the plan document to properly treat holiday bonuses, gift cards, special pay, and other taxable compensation such as group term life or long term disability, all of which may only affect the last payroll of the year.  In addition, the plan may have a different definition of compensation for each type of contribution (employee, employer match and additional employer contribution).
  • Did the plan calculate contributions in accordance with Internal Revenue Service (IRS) pension plan limits, plan limitations or plan eligibility requirements, such as requiring a participant to be employed on the last day of the of the plan year in order to receive an employer contribution?
  • Last but not least, are there any plan forfeitures from non-vested participant accounts that could be utilized to reduce the employer match, employer contributions or plan administrative expenses?  Pursuant to IRS regulations, forfeitures  must be used or allocated in the same plan year as incurred and not be accumulated in a suspense account over several years.  Plan sponsors should also refer to the plan document to ensure forfeitures are used in accordance with the plan’s provisions.

Set More Aside During National Save for Retirement Week

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Wasser_DianeOctober 24, 2013

By: Diane Wasser, CPA 

Did you know it is National Save for Retirement Week?$?$?$?$?$?$?$?

National Save for Retirement Week is a national effort to raise public awareness about the importance of saving for retirement. National Save for Retirement Week is held every year during the third week of October.  We encourage all to recognize the importance of setting aside money during the working years for future retirement needs.

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