This webinar looked at current trends and risks related to employer sponsored 401(k) plans. The discussion included current fiduciary, accounting, and fraud/risk trends that can assist management in planning for 2014 regulatory filings. Check out our Upcoming Events page for news and updates on our future seminars and webinars at http://www.macpas.com/events/. View a full recap of this webinar at http://www.macpas.com/current-401k-trends-and-risks/ This webinar was hosted by Dan Sturm (Audit Principal) along with fellow speakers Shalane Cohen (Senior Audit Manager) and Danielle Guinter (Audit Manager), all with McKonly & Asbury. Current 401(k) Trends and Risks

2. FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L B O W E R C R A F T , M S I S , C I S A
&
D A V I D H A M M A R B E R G ,
C P A , C F E , C I S S P , M C S E , W X Y Z

4. CURRENT 401(K)
TRENDS AND RISKS
DAN STURM
DANIELLE GUINTER
SHALANE COHEN

5. MCKONLY & ASBURY, LLP
• Audit, Tax and Advisory Firm
• Regional presence in Pennsylvania
• Variety of clients ranging from construction to manufacturing and other clients
• Employee Benefit Plan Specialty
• Defined Contribution
• Defined Benefit
• Health and Welfare
• ESOP
• Best Places to Work and Best Accounting Firm

6. INTRODUCTIONS
Daniel Sturm, CPA
• 10+ years of Employee Benefit Plan audit experience
Danielle Guinter, CPA
• 8+ years of Employee Benefit Plan audit experience
• 529 & retirement plan specialist prior to joining McKonly & Asbury
Shalane Cohen, CPA
• 6 years of employee Benefit Plan audit experience

7. AGENDA AND BACKGROUND
Current 401(k) trends and risks based on
• Questions received from clients
• Common plan deficiencies reported by DOL
• Research performed by our team
Topics discussed today
• Fiduciary responsibility
• Current risks and trends
• Fraud

8. WHAT IS A PLAN FIDUCIARY?
• Anyone who uses discretion in administering and managing the plan
or controlling the plan’s assets.
• Based on functions performed, not just the person’s title
• DO NOT have to be named in the written plan document to have
fiduciary responsibilities

9. WHO SHOULD BE INVOLVED WITH THE PLAN?
• Personnel from:
• Human Resources
• Finance
• Benefits of having members of HR and Finance working together:
• Improved understanding of the Plan
• Better identification of risks
• More efficient resolution of issues and concerns
• More efficient audits of your plan

10. RESPONSIBILITIES OF THE PLAN FIDUCIARY
• Act SOLELY in the interest of plan participants and their beneficiaries.
• When making decisions, they must be prudent and follow the plan
document.
• Ensure that the participants have diversified investments to reduce
the risk of large investment losses
• Participants are paying only REASONABLE plan expenses

11. WHO PAYS THE EXPENSES?
• The plan document typically dictates who pays the expenses
• Expenses may be paid by participants or plan sponsors
Types of Expenses
• Administration fees
• Individual service fees
• Investment fees
http://www.dol.gov/ebsa/publications/undrstndgrtrmnt.html

12. HOW DO YOU EVALUATE THE PLAN EXPENSES?
• Have a PROCESS for making
decisions
• Policy for surveying potential
providers
• Understand the service(s) that you
are receiving
• DOCUMENT the process

13. KEEPING UP WITH ONGOING RESPONSIBILITIES
• Everything with the Plan should be continually monitored, including
fees
• Investment committee (if applicable) or Fiduciary and plan
management should be meeting routinely to discuss fees
• DOCUMENT the discussions of these fees

14. THE ROLE OF AN ADVISORY COMMITTEE
• Starting an advisory/plan committee should be a priority
• Mitigates the risk of potential lawsuits
• Committee typically includes:
• Executive Management
• Finance
• Human Resources
• Investment Advisor
• Anyone who had valuable information for the Plan

15. COMMUNICATION AND DISCLOSURE OF FEES
• Fees must be communicated to participants prior to and subsequent
to participation in the plan.
• Sponsor is ultimately responsible for making sure fees are properly
disclosed.

16. COMMUNICATIONS FROM THE IRS AND DOL
• Audits may be performed over entire plan or specific red flag areas.
• Audits may be performed on-site ore remotely through the requests for
information.
Red flags may be triggered by:
• Comparison of retirement plan data to health and welfare plan data
• Significant drop in plan participants indicating a possible partial plan
termination

17. PARTIAL PLAN TERMINATION
• A partial plan termination analysis should be performed when:
• Lay offs occur
• Sale of a portion of the business
• Typical threshold to use is a 20% reduction in participants
• Participants affected by the partial plan termination shall become
100% vested.
• Analysis should involve an ERISA attorney

18. DOL/IRS HOT TOPICS
• Pension codes on Form 5500
• Disclosure of changes in accountants or actuaries
• Late remittances

19. THE DOL AND LATE REMITTANCES
• Late Remittances
• Large plans - Employee contributions must be remitted as soon as
administratively possible
• Small Plans – 7 days
• Consult an ERISA attorney for uncertainties

20. VFCP AND SELF CORRECTING
• Disclose late remittances on supplemental schedules
• Better to self-correct than do nothing at all
• Correction process may take some time, but is not overly
difficult

21. WHAT TO EXPECT DURING AND AUDIT
Reasons you were selected:
1. Completely at Random – LUCKY YOU!
2. Something stood out on your 5500
3. Participant complaint
DOL audit is more focused on participant
• Are their fees reasonable?
IRS audit is more focused on compliance from an operational standpoint
• Adopting amendments timely
• Performing discrimination testing and correcting, if necessary
• Hardship withdrawals in accordance with Plan Doc

22. NOTIFICATION OF AUDIT
• Requests often begin with the following:
• Plan documents
• Summary annual Reports
• Payroll deduction reports
• Fidelity bond information
• Investment policy
• Committee meeting minutes
• Documentation of internal controls
• Provide information requested TIMELY!
• Asking for more time is better than providing incomplete data

23. RESOURCES TO AVOID COMMON PLAN PITFALLS
• IRS Plan sponsor responsibility listing
• IRS fixing common plan mistakes document
• DOL article about understanding retirement plan fees and expenses
• AICPA audit quality center
• http://www.irs.gov/Retirement-Plans/Plan-Sponsor/A-Plan-Sponsor%E2%80%99s-Responsibilities
• http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Fixing-Common-Plan-Mistakes
• http://www.dol.gov/ebsa/publications/undrstndgrtrmnt.html
• http://www.aicpa.org/interestareas/employeebenefitplanauditquality/pages/ebpaqhomepage.aspx

24. BEST PRACTICES
• Understanding plan document and understand it some more
• Perform self-audits of processes and transactions
• Review your 5500 carefully and ask questions of preparer

25. DOL/IRS ITEMS OF FOCUS
• IRS determination letter cycles
• DOL/IRS are using data analytics more frequently since
the implementation of EFAST

26. IN SUMMARY
• Risk continues to grow with sponsoring 401(k) plans
• Fraud opportunities occur and continue to exist
• Focus of DOL and IRS continues to be on the participants and
compliance
USE YOUR RESOURCES!!

27. THANK YOU
Additional Questions? Please contact us.
• Dan Sturm dsturm@macpas.com
• Shalane Cohen scohen@macpas.com
• Danielle Guinter dguinter@macpas.com

31. FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L B O W E R C R A F T , M S I S , C I S A
&
D A V I D H A M M A R B E R G ,
C P A , C F E , C I S S P , M C S E , W X Y Z