Art of the Qualified Plan Audit

Retirement Readiness vs. Immediate Financial Needs Life is a balancing act. Regulators strive to fight leakage by imposing penalties on early distributions, but they also don’t want to add to legitimate unforeseen and extreme emergency situations by imposing penalties when participants are in trouble. At the same time, regulators don’t want to impose administrative burdens … Continued

In Summary Counting Criterion Shifted for Audit Exemptions: Effective for plan years beginning after January 1, 2023, the Department of Labor changed the criterion for mandatory financial statement audits from the number of eligible participants to the number of participant account balances. This change exempts approximately 19,000 retirement plans, namely in industries with high turnover, … Continued

SECURE 2.0: Mandatory Automatic Enrollment Coupled with Corrective Contribution Relief Employees Plan to Make the Right Choice…Later When it comes to choosing to save for retirement, people tend to be short-sighted. Many eligible employees don’t choose to participate in their employer-sponsored retirement plans. Behavioral finance studies show that people tend to imagine themselves making the … Continued

Enhanced Correction Options: I Didn’t Know What I Was Missing! Mistakes happen…all the time, especially in retirement plan administration. For years, I have been thankful for the self-correction opportunities granted by the IRS Program, the Employee Plan Compliance Resolution System. With each update to the program, my clients would benefit from additional opportunities to self-correct … Continued

In Summary Increasing Retirement Savings and Access: To expand coverage, new 401(k) and 403(b) plans must implement automatic enrollment and escalation starting in 2025. Additionally, the age for Required Minimum Distributions (RMDs) is raised to 73 in 2023 and 75 in 2033, and Roth accounts are exempt from RMDs while the participant is alive starting … Continued

Posted by Maria T. Hurd, CPA Yes, the Audit Extends to Excluded 403(b) Employees: Testing Compliance with Universal Availability It’s never a good sign when an employer sponsoring a 403(b) plan says: “You don’t need to see backup for employees who are excluded from the plan.” Ohh! But we do! Not often, but sometimes, clients … Continued

In Summary Exceptions Exist for Universal Availability: Limited exceptions permit the exclusion of certain employees from the 403(b) elective deferral opportunity, such as non-resident aliens, employees who normally work less than 20 hours per week, specific student employees, and those eligible for deferrals under certain other employer plans (401(k), governmental 457, or another 403(b)). Crucial … Continued

In Summary Reliance on External Parties Does Not Erase Fiduciary Responsibility: There is a misconception that service providers, like recordkeepers, are solely responsible for compliance. While these providers assist with administration, the plan sponsor retains the ultimate legal and fiduciary duty to ensure the plan operates within both the law and its own written terms, … Continued

Posted by Maria T. Hurd, CPA Where have you worked, for how long, and how much have you contributed to the 403(b) plan? These are all the questions that make up the puzzle pieces necessary to compute each participant’s available 403(b) catch-up. Participants in a 403(b) plan can make an additional contribution once they have … Continued

Posted By: Maria Hurd, CPA Why Ask Why? Why should the rules that determine how and how much a person can save for retirement be different depending on whether the person works for a government entity, a nonprofit, or a for-profit employer? People are people, and their retirement needs are not different based on what … Continued