EisnerAmper Co-Hosts Employee Benefits Plan Event at NYSE
On March 21, 2019, EisnerAmper, in conjunction with Charles Schwab and CMC Interactive, hosted an exclusive event for our clients and prospects at the New York Stock Exchange. Sponsors of plans large and small toured the stock exchange floor, followed by an educational discussion by EisnerAmper LLP and CMC Interactive on the topic of “How to Effectively Address Operational Challenges for Employee Benefit Plans.”
Diane Wasser from EisnerAmper and Trish Carabello from CMC Interactive, along with Jake King from Charles Schwab, engaged in an informative discussion regarding employee benefit plan operational defects, which are instances when the daily operation of the plan is different than the plan’s provisions as outlined in the plan document. The panelists pointed out that the most common defects consisted of (1) calculating contributions using an incorrect definition of compensation; (2) failing to properly deduct loan payments; (3) improperly applying a plan’s eligibility provisions; and (3) failing to utilize forfeitures on an annual basis. Operational defects are significant since they have the potential to cause a plan to lose its tax qualified status. The discussion was not intended strike fear in the audience, but rather to inform them of common issues and give them the insight to proactively avoid these unwelcome scenarios.
Each of the speakers acknowledged that plan sponsors face a huge responsibility when operating their employee benefit plans in order to maintain the tax qualified status. Knowing the plan provisions is extremely important in order to ensure the plan operates in accordance with its terms. Definition of compensation errors occur frequently and generally stem from failure to refer to the plan document and be aware of its specific terms. Each plan defines the compensation to be used when calculating contributions, and failing to use that compensation causes the contribution to be misstated, whereby correction becomes necessary.
The other significant takeaway, in addition to understanding what a plan document says, is to know the options available to correct errors if and when they occur. As the speakers explained the above four operational defects, they also gave an overview of the IRS Employee Plans Compliance Resolution System (“EPCRS”), which contains the methods available to correct plan operational errors. EPCRS includes self-correction and voluntary compliance programs. Also, DOL programs include voluntary fiduciary correction and delinquent filer voluntary compliance programs.
Attendees had very positive feedback and appreciated the insight into plan operations, along with the comfort in knowing there are ways to correct mishaps should they occur.