Does your plan require an annual audit?

If your eligible participant count (including terminated employees who maintain an account balance) exceeds 100 at the beginning of your plan year you may be required to conduct a benefit plan audit (the one exception is the *80-120 rule.) The audit is intended to confirm the plan is operating within the guidelines of the plan documents and follows specific Department of Labor and IRS regulations.

Key areas of concern during an audit

  • Documentation of all fiduciary level decision-making: Decision-making must follow ERISA procedural prudence, which entails a specific and rigorous process and documentation of discussions and conclusions.
  • Establishment of a Retirement Plan Committee: An established oversight committee should meet regularly to review plan status and conduct plan management functions.
  • Adoption of a formal Investment Policy Statement (IPS): A signed IPS provides a ‘road map’ which must be followed for selection and monitoring of investments within the plan.
  • Administration of the Definition of Compensation: Plans may use different definitions of compensation for different purposes and the appropriate definition must be applied for deferrals, allocations, and testing.
  • Documentation of service provider selection and monitoring: Documentation of how plan fiduciaries are determining reasonableness of fees, services, and investment opportunities is essential for fiduciary liability mitigation.
  • Timely remittance of employee deferrals: Employee deferrals must be remitted to the investment provider as soon as administratively feasible and has been stressed in litigation activity.
  • Allocation of plan forfeitures: Plan forfeitures that accrue when an employee leaves the Plan and their account is not fully vested should be allocated at the end of each plan year in which they were accrued.

How Kampstra Wealth Management can help

Kampstra Wealth Management advisors will help your retirement plan committee adopt an investment policy statement, document committee meetings and decisions, and regularly run plan fee benchmarking reports. We are knowledgeable about plan design and can work closely with your plan’s third party administrator (TPA) to help mitigate potential liabilities.

*The 80-120 rule provides an exception for growing businesses. If you (a) have between 80 and 120 participants, and, (b) were considered a small plan in the previous year, you can continue to file the shortened version of the form. When you report at least 121 participants, you must file as a large plan. If you file as a large plan after employing the 80-120 exception, you must continue to file as a large plan – even if your participant count drops below 120 – as long as you have at least 100 participants in your plan.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.

Securities offered through Triad Advisors, LLC, Member FINRA/SIPC. Advisory services offered through Triad Hybrid Solutions, LLC, a registered investment advisor. Kampstra Wealth Management and Triad Advisors, LLC are not affiliated.