U.S. Department of Labor 401(k) Seminar

U.S. Department of Labor

401(k) Seminar

March 26, 2013

855 N. River Rd., Suite 300 Indianapolis, IN 46240

(317) 842-4466 www.sikich.com/indianapolis

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Common Errors Within Benefit Plans

March 26, 2013

Plan Audit – Review Environment• Department of Labor (DOL) – Plan Audit Review Process

• Firm Inspections

• Mini Inspections

• Small Practice Inspections

• Peer Review Process

• Condition of Firm Membership of the American Institute of Certified Public Accountants (AICPA) and nearly all state CPA Societies

• Condition of Firm Membership of Employee Benefit Plan Audit Quality Center (EBPAQC)

©2013 Sikich LLP. All Rights Reserved.

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Plan Audit Environment• Nationally, approximately 80,000 plan audits are performed annually

by approximately 9,200 CPA firms

• More than 100 Plan Audits – Approximately 80 CPA Firms (less than 1%)

• Less than 100 Plan Audits – Approximately 9,120 CPA Firms (more than 99%)

• More than half of these Firms perform only 1-2 Plan Audits per year


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Hire a Quality Audit Firm• Verify your auditor is a member of the AICPA Audit Quality Center for

Employee Benefit Plan Audits

• Requires additional CPE specific to benefit plan audits

• Benefit plan audits will be part of peer review process

• Resources available at www.aicpa.org -go to interest areas then plan sponsor resource center

• Inquire about credentials of Staff

• How many benefit plan audits do they work on?

• How many years experience?

• Will a partner or manager be on site in the field to address issues?

• Benefit plan audits are very different than corporate financial statement audits and your auditor should be trained in the EB area


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Dangers of Not Using a Specialist• Lost time and resources as your staff trains the auditors

• Failure of the plan sponsor’s fiduciary responsibility to file a complete and accurate Form 5500

• Possible rejection by the DOL of the Plan’s Form 5500

• In the eyes of the DOL, filing a substandard plan audit with the Form 5500 is the same as not filing the Form 5500 at all

• DOL can assess a penalty of $1,100 a day (up to $50,000) for a Form 5500 with a missing or deficient audit report

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Benefits of an Audit• Ensures the plan sponsor satisfies requirement to submit a complete

and accurate annual return

• Make suggestions for improving internal controls

• Provide recommendations on improvements for plan sponsor fiduciary requirements

• Review minutes of meetings to ensure decisions are fully and accurately documented

• Review contracts with third-party service providers and fee arrangements

• Suggestions on best practices seen with other plans

• Detecting problems early so plan sponsor can correct before identified by IRS or DOL


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Errors Found During Audits• Employee Deferrals

• Missed processing employee elective deferral changes

• Missed processing automatic % increases when plan has auto enrollment

• In-house or third-party payroll service not calculating deferrals on proper types of compensation

• Deferrals missed from bonus checks, manual checks, special checks, final vacation checks

• Deferrals deposited late

• Missed depositing deferrals from special payrolls or executive payrolls


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Errors Found During Audits• Participant Loans

• No separate loan policy if required per plan document

• Not following terms of loan policy such as rate of interest or number of loans

• Not starting payments timely

• Not defaulting loans per terms of plan

• Mergers/Spin Offs

• No board resolutions or plan amendments documenting legal date of transaction – using physical transfer date improperly

• No or inadequate black out notices regarding investments

• No reconciliation of transfer at plan or participant level

• Bad contribution cut off

• Not understanding which plan is surviving plan


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Errors Found During Audits• Eligibility

• Improper exclusion of part time, temporary or leased employees

• Late notification of eligibility

• Early entry into plan

• Not following automatic enrollment

• Miscounting number of participants for Form 5500

• Forfeitures

• Not using them in accordance with plan document terms – to reduce employer match, pay plan expenses, reallocate same as match, reallocate same as profit sharing

• Not recognizing forfeitures per the vesting schedule in plan document


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Errors Found During Audits• Distributions

• Miss making required distributions at 70 ½

• Miss making distributions by the age required in the plan – i.e. age 65

• Incorrectly applying vesting in calculations

• Allowing hardships or in-service distributions if plan does not allow

• Not obtaining and retaining proper evidence of hardship

• Not properly stopping or restarting employee deferrals when a hardship was taken

• Not stopping annuity payments when participants die


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Errors Found During Audits• Partial Plan Termination

• Not considering whether one has occurred when large amount of employees are involuntarily terminated

• Plan expenses

• Not following terms of service agreement

• Not allowed to be paid by plan, plan sponsor should pay

• Discrimination Testing

• Testing not performed

• All required tests not performed

• Testing failures not addressed or not addressed timely

• No consideration of controlled group issues


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Sample Plan Sponsor Controls• Payroll/Contributions

• Ensure that the employee contributions are remitted within the appropriate time period

• Ensure correct amount of employee contributions are remitted to the custodian and deposited timely into proper employee accounts

• Ensure custodian invested money timely into participant accounts

• Recalculate amount of employee deferral withheld

• Review settings in payroll system to ensure deferrals and match are calculated on correct types of compensation


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Sample Plan Sponsor Controls• Participant Loans

• Ensure employee loan repayment amounts are correct

• Recalculate balance on selected loans to ensure in accordance with amortization schedules

• Disbursements

• Recalculate vesting/forfeitures on selection of distributions

• New Hires

• Review a sample of new hires to ensure they were offered participation and enrolled timely into the Plan


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Sample Plan Sponsor Controls• Oversight Committee

• Establish a committee to monitor administrative and investment issues

• Meet regularly

• Document meeting decisions and discussions (take minutes)

• Administrative Fees

• Periodically benchmark fees for reasonable and ensure advisor renegotiates your fees with your service provider

• Ensure that fees charged are in accordance with service agreement


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Questions?Michael D. Wolf, CPA

Manager

Sikich LLP

8555 North River Road, Suite 300

Indianapolis, IN 46240

317.842.4466

[email protected]

This document is not written tax advice directed at the particular facts and circumstances of any person. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this document is not intended to be used, and cannot be used, by

any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

$76M in revenue in 2012

6,776 public and private sector clients

7,364 individual clients

153,882 square feet to serve clients

400+ total personnel

71 partners

1 collaborative and positive culture

About Sikich• Multi-disciplinary: An accounting,

advisory, investment banking, technology and managed services firm with clients in the U.S. and internationally.

• Excellent reputation: With a reputation for professional excellence, Sikich provides unsurpassed client service as well as timely and cost effective services.

• Strong talent: We employ more than 400 talented people including 71 partners, all of whom devote their careers to a focused area.

• Award winning: Accounting Today ranks the Firm 40th nationally among the top 100 accounting firms and 12th in the top 100 VARs.

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Honors & Recognitions

Accounting• #47 in Accounting Today’s

2012 Top 100 Accounting Firms

• INSIDE Public Accounting’sTop 50 Accounting Firms in 2012

• INSIDE Public Accounting’s All-Star Firms in 2012

Technology• Top 1% of all ERP solution

partners in the world

• 2012 Microsoft Dynamics Inner Circle

• 2012 Microsoft Dynamics President's Club

• #12 on Accounting Today's Top 100 VARs in 2012

• #13 on Bob Scott's Top 100 VAR List for 2012

Tracing Our Roots

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

2008-2011

Merges with 4 CPA firms and

solidifies position in the Top 50 with

more than 375 employees

1982

Sikich Gardner & Co. was formed; takes up residence in

Aurora and Springfield

1998

Merges with Intelligent Computer Solutions LLC and starts its

technology practice

2012

30th Anniversary

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Sikich Service Lines

Securities are offered through Sikich Corporate Finance LLC, a registered broker dealer with the Securities Exchange Commission and a member of FINRA/SIPC. Advisory services offered through Sikich Financial, a Registered Investment Advisor. General securities offered through Triad Advisors, Member FINRA/SIPC.

Accounting, Audit & TaxFinancial Reporting

Employee Benefit Plan Audit

Accounting Services

Tax Planning

AdvisoryBusiness Valuation

Dispute Advisory

Financial Advisory

Flex-Staff Solutions

Human Resources

Marketing & Public Relations

Supply Chain

Investment BankingAcquisitions Advisory

Sales Advisory

Capital Raises

Strategic Advisory

TechnologyAccounting & ERP Software

CRM Software

IT Infrastructure

Cloud & Hosting Solutions

Strategic IT Planning

Communication & Collaboration

IT Consulting

Managed ServicesOutsourced Accounting

Managed IT

Outsourced Human Resources

Outsourced Marketing & Public Relations

Industry Expertise, Tailored Approach

» Non Profit

» Construction

» Healthcare

» Government

» Higher Education

» Agriculture

» Manufacturing & Distribution

» Professional Services

» Real Estate

» Retail

Deep industry experience and longevity.

Cross sectional teams with a depth and breadth of experience to handle the complete solution.

Solution centric and product agnostic.

Michael D. Wolf, CPA Manager Michael D. Wolf, CPA, specializes in audit and assurance services. His primary focus is on providing audit and assurance services to not-for-profit, manufacturing, construction, service, and employee benefit plan clients. He understands the issues facing these organizations and is extremely familiar with the risk factors that need to be considered in designing and performing their audits, as well as the business issues they face in the marketplace. Mike also has considerable experience in the area of corporate and individual taxation, including multi-state planning and compliance.

Service Areas Assurance and Advisory Services Income Tax Planning, Consulting Construction Services Not-for-Profit Services Manufacturing Services Employee Benefit Plan Audits

Affiliations American Institute of Certified Public Accountants Indiana CPA Society Peer Review Committee Member, various Task Force Committees Construction Financial Management Association Carmel Chamber of Commerce Knights of Columbus Central Indiana Chapter of the Kelley School of Business Alumni Association Past Board Member and Past Program Committee Chair Springmill Crossing Property Owners Association, Past Treasurer

Education Bachelor of Arts Degree in Accounting, Indiana University

8555 North River Road Suite 300 Indianapolis, IN 46240 P: 317.842.4466 F: 317.577.7724 E: [email protected]

877.279.1900 | [email protected]


Developing and maintaining employee benefit plans requires considerable time, effort and resources—after all, your employees rely on benefits to secure their futures. Presenting your benefits provider with incomplete or inaccurate audit reports may result in plan disqualification or significant penalties. Maintain the benefit plans on which your employees rely by working with the experts at Sikich. Working with Sikich professionals will offer you distinct advantages, including:

ú Assurance of quality ú Efficient audit process ú Potential fee savings ú A detailed constructive management letter ú Access to up-to-date benefit plan regulatory and accounting issues through:

• Meetings• News alerts• Special focus mailings• Seminars and webinars

Receive top-quality help from credentialed, highly trained and experienced professionals who are dedicated in employee benefit plan audits, administration and consulting services—and who work with more than 200 plans firm-wide.

Your time and resources are valuable, which is why our team approaches employee benefit plan audits in an efficient manner—reducing the time we need from your personnel and allowing them more time for their regular duties.

Included in the audit is a management letter that identifies opportunities to correct potential problems before they lead to penalties or plan disqualification. Additionally, discover how to achieve and maintain a competitive advantage—essential for employee retention—through a section in the letter that is focused on current trends in the employee benefits area, and which benefits other companies are currently offering.

Rely on the employee benefit plan practice of Sikich to provide accurate, complete, timely, professional and cost-effective services that will meet your organization’s specific objectives, now and in the future.

Employee Benefit Plan Audit



service areas

� Accounting & Consulting Services

� Assurance Services

� Business Valuation

� Dispute Advisory Services

� Graphic Design & Marketing Services

� Human Resource Consulting

� Investment Banking & Corporate Finance

� Retirement Plan Services

� Tax Services

� Technology Services & Products

� Wealth Management

Organization Sikich is a dynamic accounting, advisory, technology, and managed services firm comprised of more than 400 employees. Our firm began in 1982 and is now one of the country’s Top 50 largest CPA firms and Top 100 VARs, operating eight offices.

Industries Sikich provides services and solutions to a wide range of industries. In certain industries, we have devoted substantial resources to develop a significant base of expertise and experience:

� Agriculture

� Construction

� Employee Benefit Plans

� Government

� Healthcare

� Higher Education

� Manufacturing & Distribution

� Not-for-Profit

� Professional Services

� Real Estate

� Retail

Statistics Revenues ................................. $64.5M

Total Partners ................................... 67

Total Employees ............................. 356

Total Personnel ............................... 423 Personnel count as of April 12, 2012

Awards � 2012, Accounting Today Top 100 Firms:

ranked 47th nationally

� 2012, Accounting Today Regional Leaders – Top Firms: Great Lakes: ranked 7th

� 2012, Accounting Today Top 100 Value Added Reseller (VAR): ranked 12th

� 2012, INSIDE Public Accounting 100 Largest Accounting Firms: ranked 47th nationally

� 2012, Daily Herald Business Ledger Book of Lists: ranked 3rd, "Accounting Firms;" Chicago Western Suburbs

� 2011, Crain's Chicago Business Book of Lists: ranked 12th, "Accounting Firms"

� 2011, Chicago Tribune’s Chicago's Top Workplaces

� 2011, Best and Brightest Company to Work For™

� 2012 - 2006, Chicago’s 101 Best and Brightest Companies to Work For

� 2010, Accounting Today Best Accounting Firms to Work For

� 2009, Best Places to Work in Central Illinois, sponsored by The Springfield Business Journal

� 2009, 2008, 2006, Sikich designated as member of the Microsoft Business Solutions Inner Circle

� 2006, 2005 Two Sikich business solutions clients awarded Microsoft Business Solutions Pinnacle award

� 2005, Certified Microsoft Dynamics – NAV Partner of the Year

Sikich Total Revenues

Sikich Profile



Sikich Profile

CertificationsAll professional accounting staff having more than one year of experience have earned or are working toward earning the designation of Certified Public Accountant. Sikich LLP is a member of the American Institute of Certified Public Accountants' Governmental Audit Quality Center and the Employee Benefit Plan Audit Quality Center. We adhere to the strict requirements of membership which assure we meet the highest standards of audit quality. In 2011, Sikich LLP received its 8th consecutive unmodified (“pass”) peer review report. This is the highest level of recognition conferred upon a public accounting firm for its quality control systems.

Microsoft PartnerSikich has earned a Microsoft ERP Gold competency; ranked among the top 1% of all Microsoft Dynamics partners worldwide; and carries the following certifications:

� Microsoft Small Business Specialist

� MCP (Microsoft Certified Professional)

� MCSE (Microsoft Certified System Engineer)

� CCNA (Cisco Certified Network Associate)

� CCDA (Certified Cisco Design Associate)

� CCEA (Citrix Certified Enterprise Administrator)

� MRMS (Microsoft Retail Management Systems)

� CISA (Certified Information Systems Auditor)

� CNE (Certified Novell Engineer)

� MS CSM (Microsoft Customer Service Manager)

� MS CAE (Microsoft Certified Account Executive)

� MCDBA (Microsoft Certified Database Admin.)

Sikich is proud to be part of the Leading Edge AllianceThe Leading Edge Alliance (LEA) is the second largest international association of independent accounting firms.* The LEA is an international professional association of independently-owned accounting and consulting firms. Members are top quality firms who share an entrepreneurial spirit and a drive to be the premier provider of professional services in their chosen markets. The Alliance provides Sikich with an unbeatable combination: the comprehensive size and scope of a large multinational company while offering their clients the continuity, consistency, and quality service of a local firm. *International Accounting Bulletin, 2011

Securities are offered through Sikich Corporate Finance LLC, a registered broker dealer with the Securities Exchange Commission and a member of FINRA/SIPC. Advisory services offered through Sikich Financial, a Registered Investment Advisor. General securities offered through Triad Advisors, Member FINRA/SIPC.

LOCATIONS:

Corporate Office 1415 W. Diehl Rd., Suite 400 Naperville, IL 60563 Phone: (630) 566-8400

Chicago, IL 123 N. Wacker Dr., Suite 1500 Chicago, IL 60606 Phone: (312) 648-6666

Decatur, IL 132 South Water St., Suite 300 Decatur, IL 62523 Phone: (217) 423-6000

Denver, CO 6021 S. Syracuse Way, Suite 111 Greenwood Village, CO 80111 Phone: (720) 200-0142

Indianapolis, IN 8555 N. River Rd., Suite 300 Indianapolis, IN 46240 Phone: (317) 842-4466

Rockford, IL 6815 Weaver Rd., Suite 100 Rockford, IL 61114 Phone: (815) 282-6565

Springfield, IL 3201 W. White Oaks Dr., Suite 102 Springfield, IL 62704 Phone: (217) 793-3363

St. Louis, MO 12655 Olive Blvd., Suite 200 St. Louis, MO 63141 Phone: (314) 275-7277

LEARN MORE:

www.sikich.com/blog

Documents

U.S. Department of Labor 401(k) Seminar