Now that we’ve started a new year, now is a good time to look back and evaluate the processes and procedures related to your organization’s employee benefit plan(s).  Your objective is to confirm your Plan is operating in compliance with the requirements of the Internal Revenue Service and Department of Labor.  A good place to start in order to determine if your plan is in compliance is to review your plan documents.

As the Plan Sponsor, you are required by law to keep your books and records available for review by government authorities. Make sure your plan records contain the plan and trust document, recent amendments, determination and approval letters, related annuity contracts, and collective bargaining agreements. Also, make sure you have trust records such as: investment statements, balance sheets, and income statements; participant records such as census data, account balances, contributions, and loan documents; compensation data; participant statements; and notices.  In addition, if you participate in a pre-approved plan, include an adoption agreement as this agreement is a part of your plan. (Now would be a good time to also make sure your organization is following the terms of the adoption agreement.)

Review your agreements with your service organizations, like the Plan administrator or trustee. Make sure that the administrative tasks for the Plan are being taken care of; required plan notices are sent to the participants, all the required forms and documents have been filed with the IRS or Department of Labor, all required testing has been performed, and all records for participant accounts are being properly maintained.

The next step to determine if your Plan is in compliance is to review, document, and test your organization’s internal control procedures to make sure your Plan operations are being administered according to the Plan documents. Documentation of your internal control procedures will assist your organization in uncovering and preventing mistakes in administering your plan. Documentation of internal controls should include procedures for Plan operations review (This will allow you to confirm you are operating your plan according to its written terms). If already documented, you should review and test your documented internal control procedures related to the administration of the Plan, and update your documentation for changes in procedures. Testing of these procedures could be done by confirming that participants’ salary deferral election forms agree with the amounts deducted from their wages; verifying the types of compensation used for allocations, deferrals and compliance testing calculations; confirming plan service providers received accurate compensation and ownership records; monitoring annual contribution and compensation limits; verifying that years of service were accurately determined for eligibility and vesting; and ensuring participants received required minimum distributions. Ensure any changes in your organization’s procedures have been communicated to your service providers. Finally, it is a great idea to have a conversation with your benefits professional to see if the plan document needs updating for law changes and changes in plan operations.

If any mistakes or errors are discovered during this process, consult with your Plan’s auditor and legal counsel in order to determine the appropriate corrective actions.  Naturally, the audit and tax team at Tate & Tryon is always happy to provide advice and guidance.

Taking the time to review your Plan documents, document and test your Plan’s internal controls, and having a discussion with your benefit plan provider will help determine whether your plan is in compliance.

Sarah Glynn is a manager in the Firm’s Audit and Assurance Services department and can be reached at [email protected].

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