Monthly Archives: July 2011

According to a recent Spectrem Group study, only 45 percent of plan sponsors fully understand their retirement plan fees. The report evaluated 600 plan sponsors with assets under management of $10 million to $200 million. Read more at Employee Benefit News.

Tax form 5500 and the accompanying audited financial statements are due on July 31, but since that is a Sunday this year, they are due on August 1, 2011.  If an extension is needed, it also needs to be filed by August 1. Please contact us if you need to file an extension for your 401(k) audit or Form 5500. Call 702-384-1120 or kparker@pbtk.com.

Employee Benefit News Contributing Editor Nancy Bolton questions ‘us vs. them’ mentality brewing in America over defined benefit pension plans in her recent article. Comparing public DB plans to private retirement plans is unfair, she says. Click here for the full article.

Life is filled with nuisances that we can avoid with little effort: lousy buffets, vacations with the in-laws, and annual checkups with the doctor.  But others, like eluding the dentist, catch up with us eventually and cause more pain and frustration in the long run.  No matter how hard you try to run from the required annual employee benefit plan audit, you cannot escape it; however, you can easily avoid some common pitfalls that can plague the audit process. 

As a shareholder with Piercy Bowler Taylor & Kern CPAs, I have audited hundreds of 401(k) plans, and I have seen the good, the bad, and the ugly of the audit process.  If you steer clear of these four mistakes, your audit will be infinitely easier than a root canal – I promise!

1. Don’t rely on the Third Party Administrator (TPA) to gather all information.  There are specific details that the auditors need to do their job, and, ultimately, the plan sponsor/employer is responsible for getting them that information.  Your company’s financial reputation is on the line – take charge of that role and manage the audit process along with the lead auditor.  You have to play an active role in the process.  So, if you know your CPA needs a list of all employees, don’t wait for the TPA to provide the information you already have.
2. Don’t transfer management roles from the plan sponsor/employer to the TPA during the audit process.  Closely related to the number one mistake, the management side of the audit belongs with the plan sponsor/employer; after all, the plan sponsor/employer, not the TPA, hires the auditor.  The plan sponsor/employer should be the main point of contact for both the auditor and the TPA.  Take ownership of this process and step in with a full management mentality; you will engage the auditors, and the work will be completed much more efficiently (which is a code word for cheaper).
3. Don’t neglect the contributions to the 401(k) plan each pay period.  If you reconcile with the TPA on a regular basis, you will avoid possible penalties later.  Cleaning up the employee contributions on a regular basis will keep the records healthy and ready to be audited.  Going back to correct mistakes later makes your job more difficult and takes time away from the auditor’s main purpose of reviewing and testing the information provided.
4. Don’t wait to prepare until just before the auditor’s arrival.  An organized auditor will give the plan sponsor/employer a document request list well in advance of the fieldwork stage.  Begin preparation shortly after year-end, and you will have time to fix mistakes, locate the necessary lists and reports, and even schedule your time in the office so you can be accessible to the auditors while they are on-site.

Ultimately, the plan sponsor/employer, TPA, and auditor must all work together on the employee benefit plan audit.  Though each party plays a very different role, most of the management will fall to the plan sponsor/employer, with direction from the auditor and assistance in information gathering from the TPA.  Since you can’t avoid the audit, if you bypass these common management mistakes, you will not only notice an improvement in the overall financial health of your plan, but you will also find a significant decrease in your stress-level during the audit.

Kelly G. Parker, CPA has been with Piercy Bowler Taylor & Kern since 1993 and is regarded as the firm’s practice leader in audits of defined contribution pension plans such as 401(k) and profit sharing plans.  He can be reached at kparker@pbtk.com or 702-384-1120.

“According to a recent survey by AARP, 71% of 401(k) plan participants reported that they pay no fees for their plan. When told of the fees, six in ten (62%) were not aware of the amount they pay in fees to maintain their account. Just under one quarter (23%) of those surveyed said that they do pay fees.”

So what can plan sponsors do to prepare their participants for the shock? Read the full article by Andrea Davis of Employee Benefit News here.