Art of the Qualified Plan Audit

Posted By Maria T. Hurd, CPA How Big Can a Retirement Plan Be and Still Qualify for the Small Plan Audit Exemption? “Define Large.” It is a question I often get from advisors hoping to get their clients out of a retirement plan audit. Until now the answer has been simple: 100 participants is the … Continued

In Summary How to Prevent Participants and Beneficiaries from Becoming Missing: Maintain accurate, current census information by regularly requesting updates through plan communications like the Summary Plan Description, and during the enrollment and exit processes. Ensure communications are clear, prominently state their purpose, and actively follow up on undeliverable mail, emails, or uncashed checks. Implement … Continued

In Summary Correction Options Exist Even if Funds Are Gone: Overpayments, which often represent a timing difference, can be corrected through the Employee Plan Compliance Resolution System (EPCRS). When a participant cannot return the money, viable alternatives include amending the 1099-R to remove favorable tax treatment, making a “make-whole” contribution to defined benefit or balance-forward … Continued

In Summary Hardship Distribution Substantiation Options: The plan may require backup documentation for the hardship reason and amount, or allow the participant to self-certify the hardship reason, amount, and financial necessity in writing. Self-certification requires the employer to provide specific written notifications regarding taxability and rules, and the participant must maintain the backup. Preventing Ineligible … Continued

In Summary GAAP and ERISA Require Disclosures for Certain Transactions: Related Party transactions that are material to the financial statements must be disclosed in the notes, providing details like the relationship, transaction description, and dollar amounts (FASB ASC 850). Separately, all transactions with the broader group of Parties-in-Interest must be disclosed unless a statutory or … Continued

Posted By Maria Hurd, CPA The SECURE Act increased IRS Late Filing Penalties for Form 5500 by how much? How can I avoid them? IRS Penalties Tenfold. That’s how much the SECURE Act (the “Act”) increased the penalty for the late filing of a Form 5500 –TENFOLD! Before the Act, the IRS could assess a … Continued

In Summary Correction for a Missed Safe Harbor Notice: If the failure to provide a safe harbor match plan notice is merely an administrative error with no consequence (the employee was otherwise informed and participating), revising procedures to prevent future lapses is sufficient. However, if the missing notice results in an eligible employee being excluded … Continued

In Summary SECURE Act Changes to RMD Age: The new rules from the SECURE Act raise the age for Required Minimum Distributions (RMDs) from 70½ to 72. Terminated non-5% owners must take their first RMD by April 1 of the year following the later of turning 72 or retiring. Five percent owners must begin RMDs … Continued

Posted by Saaib T. Uppal, CPA, QKA The IRS has announced cost-of-living adjustments that should be noted for retirement planning purposes. Below is a chart that outlines employee benefit plan limits for 2021: PLAN LIMITS RETIREMENT & SOCIAL SECURITY 2021 Limit 2020 Limit 2019 Limit Section 401(k), 403(b), 457(b) elective deferrals  $19,500  $19,500  $19,000 401(k) … Continued

In Summary Plan Error Correction Methods in EPCRS: Operational errors in retirement plans can be fixed through the IRS Employee Plans Compliance Resolution System (EPCRS) using the Self-Correction Program (SCP) for certain timely-corrected and insignificant errors, the Voluntary Compliance Program (VCP) with an IRS fee and submission for significant or specific errors, or the Audit … Continued