Retirement Plan Audit Strategies

Presenting a live 110‐minute webinar with interactive Q&A

Retirement Plan Audit StrategiesRevising Audit Roadmaps Based on 403(b) Regs, Form 5500 Changes and New Transitional Guidance

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1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, NOVEMBER 17, 2010

Today’s faculty features:

Alicia Schmidt, Manager, Employee Benefit Assurance Services Group, LarsonAllen, Minneapolis, Minn.

Kriste Naples-DeAngelo, Partner, Pension Services Group, EisnerAmper LLP, Bridgewater, N.J.

Scott Tuxbury Director of Retirement and Investments New Wealth Advisors Tewksbury MassScott Tuxbury, Director of Retirement and Investments, New Wealth Advisors, Tewksbury, Mass.

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R ti t Pl A dit St t i Retirement Plan Audit Strategies Webinar

Nov. 17, 2010

Kriste DeAngelo, EisnerAmper [email protected]

Alicia Schmidt, [email protected]

Scott Tuxbury, New Wealth Advisors [email protected]

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Today’s Program

Background: 403(b) Regs, Form 5500, Guidance[Alicia Schmidt]

Slide 6 – Slide 23

When An Audit Is Required[Kriste DeAngelo]

Plan Document Requirements And Fiduciary Responsibilities Slide 52 – Slide 67


[Scott Tuxbury]

Experiences With Recent Audits[Alicia Schmidt, Kriste DeAngelo and Scott Tuxbury]


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BACKGROUND: 403(B) REGS Alicia Schmidt, LarsonAllen

BACKGROUND: 403(B) REGS, FORM 5500, GUIDANCE

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Agenda For This SectionAfter this session you will better understand:

• 403(b) regulations and their impact

• Form 5500 changes and their impactg p

• Relevant guidance from the DOL and its impact

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Final 403(b) Regulations: Overview

IRS regulatory changes

– Issued July 26, 2007

– First comprehensive regulations in 43 years

Effective for taxable years beginning after 2008– Effective for taxable years beginning after 2008◊ Jan. 1, 2009 for calendar-year plan◊ July 1, 2009 for June 30 plan year-end

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Final 403(b) Regulations – Overview (Cont.)

DOL regulatory changes

– In November 2007, the DOL eliminated the exemption granted to 403(b) plans from the annual Form 5500 reporting, disclosure and audit requirements.

– Effective for plan years beginning on or after Jan. 1, 2009 p y g g

– 403(b) pension plans may now subject to Title 1

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– Certain 403(b) plans will be subject to an independent audit, similar to 401(k) plans

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Impact Of Final 403(b) Regulations

Title 1 of ERISA defines a retirement plan “as any plan, fund or program established by an employer that provides retirement income to employees or results in a deferral of income by employees for periods extending to the termination of covered employment or beyond.”

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Impact Of Final 403(b) Regulations (Cont.)

ERISA Title 1

– Many 403(b) plans of tax-exempt 501(c)(3) organizations are subject to ERISA.

– ERISA Title 1 does not apply to:◊ Governmental plans◊ Governmental plans◊ Certain church plans◊ Tax-exempt employers with 403(b) plans not considered to

constitute the establishment or maintaining of an “employee

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constitute the establishment or maintaining of an employee pension benefit plan” under ERISA (DOL “safe harbor” exemption)

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DOL safe harbor exemption

– Deferral-only function by employer does not constitute an ERISA 403(b) plan

– A deferral-only function is defined by ERISA as:◊ Employee participation is voluntary◊ Employee participation is voluntary◊ Employee can enforce vendor contract without employer’s

assistance◊ Employer receives no unreasonable direct or indirect

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◊ Employer receives no unreasonable direct or indirect compensation

◊ Employer’s involvement is limited

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DOL safe harbor exemption (Cont.)

– Employer involvement is considered limited as follows:p y◊ Letting vendors publicize products to employees

• Cannot dictate which vendors to use◊ Requesting information concerning 403(b) products◊ Requesting information concerning 403(b) products◊ Summarizing or compiling employee information◊ Collecting and remitting deferrals to vendors

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◊ Maintaining records (e.g. deferral/plan records)

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DOL safe harbor exemption (Cont.)

– Plans will not meet DOL safe harbor exemption, and will be subject to ERISA, if:◊ One of the safe harbor exemption requirements is not met◊ The plan provides for employer contributions◊ The employer acts on behalf of participants in facilitating or

resolving issues with vendors, e.g. threatens to move g gemployee accounts from vendor

◊ The level of employer involvement is, or could be concluded as is, more than what is limited under the exemption

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prequirements

• Example: Approval of distributions

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Form 5500Recent Form 5500 requirements

– Effective for plan years beginning on or after Jan. 1, 2009◊ Form 5500 required to be electronically filed starting in 2009

– Due 7 months after plan year end (12/31 plan year due 7/31)p y ( p y )◊ Can be extended an additional 2 ½ months (12/31 plan year

extended to 10/15)– Prior filings only included first three pages of the Form 5500Prior filings only included first three pages of the Form 5500

◊ Only certain sections applied– Additional schedules applicable in addition to the first three

pages

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pages◊ Schedule A Schedule C◊ Schedule D Schedule H◊ S h d l I S h d l R

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◊ Schedule I Schedule R

Form 5500 (Cont.)

Form 5500 (first three pages)

– Participant counts◊ Determines if it is a small or large plan (audit implications)g p ( p )◊ General rule

• Small plan = Fewer than 100 participants at the beginning of the plan yearbeginning of the plan year

• Large plan = 100 or more participants at the beginning of the plan year

Identify the benefits provided by the plan (use codes)

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– Identify the benefits provided by the plan (use codes)– Identify the plan funding and benefit arrangement– Identify which schedules are applicable and included

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Form 5500 (Cont.)Schedule A: Insurance information

– Complete if plan holds insurance products for investments◊ Pooled separate accounts◊ Investments in general accounts of insurance companiesg p

Schedule C: Service provider information

– Complete to report persons who received, directly or indirectly, $5,000 or more in compensation in connection with services rendered or position with the plan

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rendered or position with the plan– Complete if there is a termination of an accountant or actuary

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Form 5500 (Cont.)Schedule D: DFE/participating plan information

– Complete if plan holds direct filing entities as investments◊ Pooled separate accounts◊ Common collective trusts◊ Master trust investment accounts◊ 103-12 investment entities

Schedule H: Financial information (large plans)

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– Balance sheet and income statement for the plan– Indicates what type of audit opinion the plan received– Yes/No questions relating to transactions during the year and

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q g g yother ERISA requirements

Form 5500 (Cont.)

Schedule I: Financial information (small plans)

– Abbreviated balance sheet and income statement for the plan– Yes/No questions relating to transactions during the year and q g g y

other ERISA requirements

Schedule R: Retirement plan informationSchedule R: Retirement plan information

– Discloses information about benefit payments made from planQ ti l ti t f di i f ti f l bj t t

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– Questions relating to funding information for plans subject to minimum funding requirements

– Question relating to coverage tests performed for the plan

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DOL GuidanceDOL Field Assistance Bulletin (FAB) 2009-02

– 403(b) plan does not need to include certain contracts or accounts as plan assets on the Form 5500, provided that:◊ Contract or account was issued to a current or former

employee before Jan. 1, 2009◊ Employer ceased to have any obligation to make

contributions (including employee salary reduction contributions) and ceased making contributions prior to Jan. 1, 2009

◊ All rights under the contract or account are legally

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enforceable by the individual owner of contract or account without employer involvement

◊ Individual contract owner is fully vested in contract or account

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DOL Guidance (Cont.)

DOL Field Assistance Bulletin (FAB) 2009-02 (Cont.)

– Contracts or accounts are not required to be excluded.

– Plan administrator needs to determine and ensure criteria are met.

– Must meet all four criteria

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– Applies to both large and small plans

– 5500 reporting relief only; will likely have a modified audit report

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DOL FAB 2010-01

– Issued on February 2010y

– Provides additional guidance to FAB 2009-02

– If the auditor discovers contracts were incorrectly excluded, the DOL expects the auditor to alert plan administrator.

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– Relief extends beyond the 2009 reporting year.

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DOL Advisory Opinion 2010-01A

– Issued on March 4, 2010

– Response to TIAA-CREF request if TIAA traditional annuity is a fully allocated contract

– DOL concluded the contract is unallocated

F l b i i ft J 1 2009 t b

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– For plan years beginning on or after Jan. 1, 2009, must be reported as plan assets on 5500 (do not have to amend prior-year filings)

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WHEN AN AUDIT IS Kriste DeAngelo, EisnerAmper LLP

WHEN AN AUDIT IS REQUIRED

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Agenda For This SectionAgenda For This Sectiongg

• Objective of the audit• What is audited?

– Limited scope audit vs. full scope auditp p– Investments– Participant data

First year considerations• First year considerations• How to prepare for the audit

– What to expect from the auditor– What the auditor expects from you

• Suggestions and best practices

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403 (b) Plans 403 (b) Plans –– Important Items To NoteImportant Items To Note

• The general goal of the 403(b) regulations was to conform 403(b) plans with the rules applicable to 401(k) plans.p pp 0 ( ) p

• Form 5500 filings will be required for all 403(b) plans covered by Title I of ERISA (as under previous rules).

• They are now subject to the same 5500 annual return requirements as• They are now subject to the same 5500 annual return requirements as are 401(k) plans.

• Even plans with fewer than 100 participants must file Form 5500 and provide financial information at the plan level that was never providedprovide financial information, at the plan level, that was never provided before.

• No change on WHO should file Form 5500• Change only on WHAT should be filed with Form 5500• Change only on WHAT should be filed with Form 5500

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Is Your Plan An ERISA Plan?Is Your Plan An ERISA Plan?

IF YOU ARE UNSURE, SEEKLEGAL COUNSEL!!!!!!!!!!!!LEGAL COUNSEL!!!!!!!!!!!!

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What Is The Objective Of The Audit?What Is The Objective Of The Audit?jj

• To express an opinion on whether the plan’s financial statements are presented fairly, in all material respects, and in conformity with U.S. generally accepted accounting principles

• The auditor is responsible for planning and performing the audit to obtain reasonable assurance that material misstatements areobtain reasonable assurance that material misstatements are detected.

• Reasonable assurance is high but not absolute

• The audit is conducted in accordance with auditing standards generallyThe audit is conducted in accordance with auditing standards generally accepted in the U.S.

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What Is The Objective Of The Audit? (Cont.)What Is The Objective Of The Audit? (Cont.)

• Generally accepted auditing standards include, among other things: – Gathering information to understand the plan and its internal

control environment– Understanding the design and implementation of internal

control– Detailed testing of a plan’s accounts and transactions – Gathering sufficient audit evidence– Documentation of findingsDocumentation of findings

• The financial statements are the responsibility of plan management; the opinion is the responsibility of auditorsmanagement; the opinion is the responsibility of auditors.

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What Is Audited?What Is Audited?

• Two basic buckets (investments, and participant accounts and activity) Investments Participants

– Opening balance– Eligibility– Contributions– Distributions– Transfers in and out– Earnings allocations– Fund allocationsFund allocations– Vesting– Ending balance

Timeliness of contributions Timeliness of contributions Prohibited transactions

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What Is Audited? (Cont.)What Is Audited? (Cont.)

Thi k i t f th fi i l t t t li it

( )( )

• Think in terms of the financial statement line items.

• Statement of net assets available for benefits– Investments– Participant loans– Receivables (accrual basis)Receivables (accrual basis)

• Participant contributions• Employer contributions

I• Income– Liabilities (not for benefits)

• Accrued expenses

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• Statement of changes in net assets available for benefits– Contributions (received and receivable)

• Timeliness of deferrals– Rollovers– Gains and losses/appreciation and depreciation on investmentsGains and losses/appreciation and depreciation on investments– Investment income

• Interest and dividendsDi t ib ti– Distributions

– Administrative expenses– Transfers/plan mergers

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• The focus of the audit is on the material account balances and major transaction classes from which the statements are derived.transaction classes from which the statements are derived.

• Participant activity is a major transaction class/

– Opening balance, eligibility, demographics, contributions, vesting, distributions, transfers, rollovers, fund allocations, earnings allocations, ending balance., g

• Focus on investments is driven by the audit scope.

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What Is Audited?What Is Audited?Limited Scope Vs. Full ScopeLimited Scope Vs. Full Scope

Investments - Limited scope or full scope audit

Limited Scope Vs. Full ScopeLimited Scope Vs. Full Scope

– Limited Scope: Assets are held by a bank, insurance company or trust company, and are certified as to completeness and accuracy.

C t di tif th i f ti t i d i th i di• Custodians certify the information as contained in their ordinary books and records. If you have more than one custodian, you will need multiple certifications.

• Custodians generally provide values based on best information available.

– Watch “as of” dates for old information

– Watch fair value

• The auditor has no responsibility to test investments, investment activity and related transactions; it is the plan sponsor’s responsibility to ensure that the investment values are proper.

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What Is Audited?What Is Audited?Limited Scope Vs. Full Scope (Cont.)Limited Scope Vs. Full Scope (Cont.)p p ( )p p ( )

– Full Scope: Audit investments, investment activity and related transactions

• Confirm existence and ownership, assure no liens, no pledges or other security interests

R bl l d i t t t ti d d d• Reasonably conclude investment transactions are recorded and investments are valued in conformity with GAAP (fair value)

• Perform testing on purchases and sales

• Disclosures are proper

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First Year ConsiderationsFirst Year Considerations

• DOL requires comparative statements of net assets available for benefits, even when the prior year was not audited.

• Will need 12/31/08 or 6/30/09 statement of net assets available for benefits, at a minimum, compiled (review or audit can be performed providing sufficient review or audit procedures are performed.providing sufficient review or audit procedures are performed.

• Must determine that the accounting principles used by the plan in the current and preceding year are consistent

• Must address the opening balances at the participant level

– Must address multiple prior years’ activity for contributions, distributions and plan activityp y

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First Year Considerations (Cont.)First Year Considerations (Cont.)

• Address completeness and accuracy of participant data and records– Address eligibility, types of benefits, participant account balancesg y, yp , p p

• Going back in time presents a unique difficulty for 403(b) plans, given th ibl dk i h tf llthe possible recordkeeping shortfalls.

• Gather complete and accurate information from all vendors, for all yearsp , y– Former employees and former vendors– Orphan contracts and missing participants

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First Year ConsiderationsFirst Year ConsiderationsDOL Transition ReliefDOL Transition ReliefDOL Transition ReliefDOL Transition Relief

• Field Assistance Bulletin (FAB) 2009-02– Provides enforcement relief for 5500 filings– Does not provide audit relief– ERISA and current regulations require the audit to be performed in

accordance with GAAS– DOL/EBSA will NOT reject a 403(b) plan Form 5500 filing solely

because the auditor’s report is qualified, adverse or disclaims an opinion (other than allowed under 29 CFR 2520.203-8) due to the p ( )exclusion of pre-2009 annuity contracts and/or custodial accounts.

– Regardless of the type of opinion issued, the auditor is still required to complete all other audit procedures (e.g., contributions, p p ( g , ,distributions).

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First Year ConsiderationsFirst Year ConsiderationsDOL Transition Relief (Cont )DOL Transition Relief (Cont )DOL Transition Relief (Cont.)DOL Transition Relief (Cont.)

• You can use this relief to determine audit requirement. If omitting these contracts puts the plan below the audit requirement threshold, then an audit will not have to be performed.

• 80-120 rule also applies in determining audit requirement, so look at number of participants at 1/1/08.number of participants at 1/1/08.

• Some sponsors may not find a qualified, adverse or disclaimer of opinion acceptable.S d ill t b i iti t l d t t / t• Some vendors will not be in a position to exclude contracts/account information that meets criteria.

• Generally, information is available within 2-3 months of year-end.

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First Year Considerations (Cont.)First Year Considerations (Cont.)

A 401(k) dit f t t t fi i h t k 1 2 th ith fi ld k• A 401(k) audit from start to finish can take 1-2 months, with fieldwork generally one week or less.

• 403(b) timing and fieldwork could be double, though, given the initial time.

• Availability of SAS 70s must be addressed – SAS 70s are reports on the design of internal controls (Type I) and

operating effectiveness (Type II) at a service provider. Outline p g ( yp ) pwhat user controls are required

– Controls of a benefit plan are composed of controls at the plan sponsor as well as at service organizations.p g

– Review by plan management at least annually, as part of the third-party service provider monitoring effort, is a good practice. 40

First Year ConsiderationsFirst Year ConsiderationsExperience Of December 2009 Plan YearExperience Of December 2009 Plan Year--EndsEndsExperience Of December 2009 Plan YearExperience Of December 2009 Plan Year EndsEnds

• Challenges with organizationsg g– Difficulty obtaining information– Lack of time urgency

Confusion regarding what plans need an audit– Confusion regarding what plans need an audit– Confusion regarding what a non-ERISA plan is vs. ERISA– Additional providers cropping up– Definition of compensation issues– Eligibility issues– Timeliness of contribution issues

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First Year ConsiderationsFirst Year ConsiderationsExperience Of December 2009 Plan YearExperience Of December 2009 Plan Year--Ends (Cont.)Ends (Cont.)Experience Of December 2009 Plan YearExperience Of December 2009 Plan Year Ends (Cont.)Ends (Cont.)

• Some positives– Longevity of employees involved in plan managementg y p y p g– Deferral forms on file at the organization – Payroll records on file at the organization

Knowledge of payroll slot vendors/records– Knowledge of payroll slot vendors/records– Knowledgeable consultants getting involved– Responsiveness of organizations to improving plan governance– Willingness of organizations to engage ERISA counsel

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Preparing For the Annual Plan Audit Preparing For the Annual Plan Audit Complete CollaborationComplete CollaborationComplete CollaborationComplete Collaboration

Plan Sponsor Service ProvidersTPAs

AuditorAuditor

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How To Prepare For The Annual Plan AuditHow To Prepare For The Annual Plan Audit

• Take control of the process!

K ibiliti Th fi i l t t t th f l• Know your responsibilities. The financial statements are those of plan management; only the opinion is the auditor’s.

• Hire a qualified independent auditor for your plan.

• If this is not provided by the auditor, request a list of schedules and documents the auditor will require prior to the start of the process.

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How To Prepare For The Annual Plan Audit (Cont.)How To Prepare For The Annual Plan Audit (Cont.)

C t t i id l h t th h th• Contact service providers early each year to assure they have the necessary information TO YOU on a timely basis. If you have not already contacted them for your 2009 plan audit, CONTACT THEM NOW!NOW!

– All individual participant contracts and account balances in your plan

– SAS 70 reports (Is it a Type I or Type II?)– Information needed for 2008 compiled financial statements and

information needed for opening balances testinginformation needed for opening balances testing

• Have a point person. Establish responsibility for the plan’s financially ti f ti (HR Fi )reporting function (HR vs. Finance)

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• Review information before it is provided to the auditor, to minimize the back-and- forthback and forth

– Make sure plan participant records are complete and accurate

– Get your books and records in shape

– Establish proper internal controls over the plan’s financial reporting process

Ensure that the plan has an up to date written plan document and– Ensure that the plan has an up-to-date, written plan document and an investment policy statement

– Ensure that the plan is in compliance with the plan’s tax exemption

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E t t thi ! ( b th )• Expect great things! (embrace the process)

– Communication throughout the process

– Innovative ideasInnovative ideas

– Suggestions on enhancing procedures for efficiency and minimization of risk

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How To Prepare For The Annual Plan AuditHow To Prepare For The Annual Plan AuditWhat To Expect From The AuditorWhat To Expect From The AuditorWhat To Expect From The AuditorWhat To Expect From The Auditor

• List of schedules and documents required• Inquiries• Understanding of internal controls • Risk assessmentRisk assessment• Requests for documentation of participant-level information• Experience

K l d f l t i l• Knowledge of plan terminology• Clear line of communication• Helpful recommendations!

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How To Prepare For The Annual Plan AuditHow To Prepare For The Annual Plan AuditWhat The Auditor Expects Of YouWhat The Auditor Expects Of YouWhat The Auditor Expects Of YouWhat The Auditor Expects Of You

• Time• Documentation requested• Full analysis of vendors• Full analysis of participant population• Coordination of communication with third- party providersCoordination of communication with third party providers

– Make sure you know what reports they can provide, and for what period and on what level (plan vs. participant)What is their turnaround time for document requests?– What is their turnaround time for document requests?

• Financial statements

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Suggestions/Best PracticesSuggestions/Best Practicesgggg

• Critical to employ fiduciary best practices, which are somewhat lacking in the 403(b) plan area

• Plan committees– Meet regularly– Keep written minutesKeep written minutes– Document fiduciary due diligence

• Investment policy statementsERISA tt l ti hi• ERISA attorney relationships

• Monitor service providers• Employ effective internal controls

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Helpful Web Sites And ToolsHelpful Web Sites And Tools

• Plan Sponsor magazine

• Profit Sharing Council of America (IPS)

• Employee Benefit Plan Audit Quality Center

– Web site: www.aicpa.org/ebpaqc

• Includes plan advisories for communication and research on plan responsibilitiesp p

• Includes tools for plan sponsors

• Your third-party provider

• www.dol.gov

• Employee Benefits Security AdministrationOffice of the Chief Accountant: 202 693 8360Office of the Chief Accountant: 202.693.8360

• EFAST Help Line: 1.866.463.3278 51

PLAN DOCUMENT Scott Tuxbury, New Wealth Advisors

REQUIREMENTS AND FIDUCIARY RESPONSIBILITIESFIDUCIARY RESPONSIBILITIES

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Fiduciary Process

EDUCATIONThe law requires that plan fiduciaries become educated. “A pure heart and an empty head” is not an adequate defense.

DOCUMENTATION

MITIGATION

All Compliance Related Activities

Proper Education by plan fiduciaries and documentation of all compliance related activities will lead to fiduciary liability mitigation.

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Who Is A Fiduciary?

Examples Of Fiduciaries Generally Not Fiduciaries

Retirement plan Committee membersT t

Attorneys Accountants Actuaries

Trustees Board of directors Company officers HR director

Anyone making business decisions (whether to establish, amend, freeze, or terminate the plan).

HR director Retirement plan

advisors

These individuals are acting on behalf of the business, and not the plan, in making these decisions.

“Functional fiduciary” – No express appointment or delegation of fiduciary authority, butFunctional fiduciary No express appointment or delegation of fiduciary authority, but is functionally considered in control or in possession of authority over the plan’s management, assets, or administration

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General Requirement Of Plan Fiduciaries

At th h t f ERISA li i th d t f thAt the heart of ERISA compliance is the duty of the plan sponsor (fiduciary) to act prudently.

“Procedural prudence” is achieved in three ways:

Take action – Do Research and D t llwhat is required to keep the plan in

compliance

Research and understand

your responsibilities

Document all compliance-related

activities

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What Is At Risk?

All plan fiduciaries are jointly and severely liableAll plan fiduciaries are jointly and severely liable.All plan fiduciaries are personally liable.

Bank Accounts

Stock OptionsInvestmentsHomes

U l t t d b f h b fid i i li bl f 100% fUnless protected by a safe harbor, fiduciaries are liable for 100% ofinvestment losses, measured against what assets would have otherwise

grown to; fiduciaries are also liable for the legal expenses and professional fees for the defense.p

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10-Plus Steps To Proper Fiduciary Mitigationy g

Fiduciary education steps

Fiduciary overview– Basic roles/responsibilities– Prohibited transactions– Roles of outside parties, attorneys and consultants– Individuals prohibited from being a fiduciary

E l ti d t i ti fid i– Evaluating and terminating a fiduciary

Fiduciary responsibilities– Carrying out duties prudently– Following terms of plan documents– Diversifying plan investments

Appointing trustees and other individuals– Appointing trustees and other individuals– Reporting and disclosure requirements– Purchasing a fidelity bond

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10-Plus Steps To Proper Fiduciary Mitigation (Cont.)Fiduciary Mitigation (Cont.)


Fiduciary liability– Fiduciary liabilities explained– Department of Labor penalties– Co-fiduciary liabilities– Breaches prior to or after being a fiduciary

Individual fiduciary liabilities– Individual fiduciary liabilities

Prohibited transactions– Carrying out duties prudently– Following terms of plan documents– Diversifying plan investments

Appointing trustees and other individuals– Appointing trustees and other individuals– Reporting and disclosure requirements– Purchasing a fidelity bond

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Minimizing risk– Drafting an investment policy– Indemnifying fiduciaries– Education and documentation– Hiring professional consultants

Conducting audits– Conducting audits

Written investment policy– Written investment policy– DOL and investment policies– Reviews, monitoring and replacement

Expenses and fees– Expenses and fees– Conducting an audit– Conclusion and action steps

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Fees and expenses– Plan fees and investment fees– Management fees– Fees and participant-directed accounts– Disclosure requirements

Retirement plan cost components– Retirement plan cost components– Evaluation steps

Participant-directed accounts Participant directed accounts– Fiduciary responsibilities and §404(c) eligible plans– Exercising control and independent control

Required disclosures– Required disclosures– Disclosures available upon request– Investment options, instructions and mapping

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10-Plus Steps To Proper Fiduciary Mitigation (Cont.)y g ( )


Employer securities– Qualified employer securities and property– Limits on employer securities and property– Diversification and notification– Voting rights

Buying or selling from a party in interest– Buying or selling from a party in interest

Blackout periods– Blackout periods– Period requirements– Notification and content requirements

Timing– Timing– Changing the length of the blackout period

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10-Plus Steps To Proper Fiduciary Mitigation (Cont.)y g ( )


Employer securities– Automatic contribution and default arrangements– ERISA claims and appeals– Categories of benefits and appropriate rules– Rules applied to ERISA covered plans– Fiduciary compliance steps– QDROs and QDRO procedures

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Documents Requiredq

404(a): Fiduciary Duties

404(c): Protection for Participant

I t t D i iFiduciary Duties Investment Decisions

Investment Policy Statement (IPS)

Quantitative/Qualitative

Broad Range of Investment Options

Sufficient InvestmentQuantitative/QualitativeFund Analysis

Prudently Select Investments

Sufficient Investment Information/Education

Description of Fees and Expenses

Consistently Implement Results 404(c) Policy Statement and Employee Notice

Copy of ProspectusIndependently Monitor Investments Copy of ProspectusIndependently Monitor Investments

Defray Reasonable Expenses Description of InvestmentAlternatives and Fund Facts

Voting and Tender Rights(if applicable)Follow Plan Document

The steps under ERISA Sections 404(a) and 404(c) are numerous and complex; please see Compliance Checklist for more detail.64

Actionable Items To Ensure Compliance

404(a)

Investment policy statement (IPS) executed

IPS i d t l t ll IPS reviewed at least annually

Quantitative/qualitative fund analysis completed and reviewed with plan fiduciaries at least annuallyp y

Investment/fund recommendations reviewed at least annually

Verify fund analysis and actions either follow procedures identified in Verify fund analysis and actions either follow procedures identified in IPS or have a documented, prudent reason for departure therefrom

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Actionable Items To Ensure Compliance (Cont.)Compliance (Cont.)

404(c)

404(c) policy statement and employee notice executed and reviewed at least annually

Policy statement and addendum given to all employees, detailing investment -related fees; reviewed at least annually

Clear investment instructions given to employees

Employees provided with sufficient information to make informed investment decisions

Specific information for each investment provided to employees

Employee communications process reviewed (enrollment and investment education) for appropriateness

Consider custom investment allocations and advice for plan participants

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Other Must-Dos

General

Identify all plan fiduciaries

Retirement plan committee established

Fiduciary education/update provided annually

All plan fiduciaries attend at least one investment due diligence and fiduciary plan review meeting

Minutes of every meeting documented and stored

Decisions regarding provider, consultant, investment selection, plan design, etc. based on research and merit, and are for the exclusive benefit of all

lemployees

Decision regarding loans, withdrawals, distributions, deferrals and contributions are made in compliance with terms of the plan document.

Fid i l i ti h ld t l t ll Fiduciary plan review meeting held at least annually

RFP/benchmarking of fees and services conducted every 2-4 years

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Alicia Schmidt, LarsonAllenK i D A l Ei A LLP

EXPERIENCES WITH RECENT

Kriste DeAngelo, EisnerAmper LLP Scott Tuxbury, New Wealth Advisors

EXPERIENCES WITH RECENT AUDITS

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E i Wi h R A diExperiences With Recent Audits

I. Plan administrators carefully review plan records to ensure they can exclude pre-Jan. 1, 2009 contracts

II. Have auditor requests available early; contact TPA well in advance for audit package; don’t hesitate to call the auditor

III. Determine early who will prepare the Form 5500

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Experiences With Recent Audits (Cont.)

I. Ensure all plan documents are signed by current employees

II E l h i d l d t d th II. Employees who signed plan documents and then were separated from service are still liable.

III. Using a retirement committee charter will mitigate that risk

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