How not to hire an ERISA auditor

Selecting an auditor for an ERISA plan is one of those fiduciary responsibilities which has been a continuing concern of the Department of Labor (“DOL”).

At a June 25, 2019 meeting of the DOL’s ERISA Advisory Council, James Haubrock of the American Institute of CPAs responded to the Council’s request for recommendations on how the DOL could help Plan Administrators improve the process of selecting an auditor. You can read Mr. Haubrock’s testimony here which provides valuable recommendations.

But I’ll approach the auditor selection process from anther and more basic direction. If you are a plan sponsor with that fiduciary responsibility, here are a few mistakes to avoid:

Retirement Funds and Business Startups: Do “ROBS” Work?

By Andrew S. Williams, Esq. on June 18, 2019 Posted in 401(k) Plans, ERISA

Here’s a not unusual scenario for Baby Boomers who have reached their company’s retirement age but are not quite ready to retire. Why not start a business or even buy a franchise? That can require a large personal investment, but he or she has a sizable 401(k) account. Why not use those funds to start a second career?

Here’s how they work.

The elephant in the room for ERISA purposes could be that “other” company

By Jerry Kalish on May 23, 2019 Posted in 401(k) Plans, Cash Balance Plans, Compliance, Defined Benefit Pension Plans, Employee Stock Ownership Plans

The passage of the Tax Reform and Jobs Act (“TRJA”) in 2018 made entity selection an important part of tax planning. The TRJA made fundamental changes affecting individual and entity tax rates. Combined with corporate transactions for strategic reasons and business owners acquiring interests in other companies, we’re seeing businesses and owners using multiple entities.

And that’s where the elephant in the room gets into the act. The elephant being the complex set of IRS rules that must be considered regarding retirement benefits offered to employees. Consider the following:

Defined Benefit Plans Have Issues Too

By Jerry Kalish on May 12, 2019 Posted in Cash Balance Plans, Compliance, Defined Benefit Pension Plans, ERISA

Defined benefit plans may have markedly declined (44% since 1975 according to the Department of Labor), but they haven’t become any more understandable to employers.

Indeed, the IRS continues to find the same type of mistakes during audit examinations. Here are the ones that made the IRS Top Ten list:

Take Advantage of ERISA Safe Harbors: They can help penetrate the ERISA fog.

By Jerry Kalish on February 6, 2019 Posted in 401(k) Plans, 403(b) Plans, Cash Balance Plans, ERISA, Fiduciary Matters

Attorneys would define a Safe Harbor as a provision of a statute or a regulation that specifies that certain conduct will be deemed not to violate a given rule. In our ERISA world, a Safe Harbor is a provision of the retirement plan law that can cut through the sometimes fog of ERISA and provide fiduciary protection to plan sponsors and at the same time make their retirement plans more efficient and effective. Here is a brief description of some of them. Continue Reading

“Compensation” for Sole Proprietors, Partners, and LLC Members…It’s complicated.

By Jerry Kalish on January 27, 2019 Posted in 401(k) Plans, 403(b) Plans, Cash Balance Plans

Compensation for employees is some variation of taxable wages reported on Form W-2. For allocation purposes, the employer or payroll provider downloads the census and compensation data based on the plan’s definition of compensation into a spreadsheet at the end of the year. It’s a little more complicated, of course, but let’s leave it at that for purposes of this post. But if you’re a sole proprietor, partner in a partnership, or member of an LLC taxed as a partnership, it’s definitely more complicated. Here’s why.

When your SIMPLE-IRA no longer fits, maybe it’s time for a 401(k) plan…and November 2 is almost here

By Jerry Kalish on October 15, 2018 Posted in 401(k) Plans

Kids can certainly outgrow their clothes, and so can employers with their retirement plans. A SIMPLE-IRA may have worked in the beginning, but if you want to change to a 401(k) plan in 2019, November 2 is the deadline to take action.

Employers must provide notice to their employees by that date that 2018 will be the last year for the SIMPLE; and that it will be replaced by a 401(k) plan. Why change from a SIMPLE to a 401(k) Plan? A SIMPLE is relatively inexpensive to administer, but here’s why 401(k) may be better for you. Continue Reading

Playing the game of 401(k) audit roulette: the odds are getting shorter.

By Jerry Kalish on October 4, 2018 Posted in 401(k) Plans, 403(b) Plans, ERISA

If you’re in the retirement plan business, you’ve heard the term “audit roulette”. It refers to the belief by some employers that the odds of their retirement plan getting audited by the IRS are in their favor. Well, those odds are getting worse. The IRS is taking technology to the next level using “data driven decisions”.

Don’t procrastinate in setting up a Safe Harbor 401(k) plan for 2018: October 1 deadline almost here

By Jerry Kalish on September 14, 2018 Posted in 401(k) Plans

The conventional wisdom is that you can wait until the end of the year to put a retirement plan in place since you can still get the tax benefits for the whole year. Maybe for some purposes, but not for setting up a Safe Harbor 401(k) plan.

If you want to set up a new Safe Harbor 401(k) plan for 2018, it has to be done by October 1. What’s a Safe Harbor plan? It’s a special provision of the tax law that permits owners and other Highly Compensated Employees (HCEs) to maximize their contribution regardless of how much the Non-HCEs contribute. For 2018, the maximum is $18,500 plus a $6,000 catch if age 50 or older.

In the era of electronic enforcement, fidelity bond issues easily revealed on Form 5500

By Jerry Kalish on July 12, 2018 Posted in 401(k) Plans, 403(b) Plans, Cash Balance Plans, ERISA

The July 31 due date (unless extended) to file Form 5500 for 2017 calendar year ERISA plans is creeping up on us. And if history be our guide, there will be many plan sponsors who don’t have a fidelity bond or one that is insufficient. It’s one of those check the boxes that can easily become a red flag for the Department of Labor (“DOL”) to take a closer look at the plan.

2004 was a big year. It was the year in which Facebook was launched; LinkedIn was just one year old; and Twitter was still two years away.

But for us, 2004 was the year in which we hitched our social media wagon to a tiny start-up technology firm in Seattle.

That firm was LexBlog which pioneered blogging for attorneys and other professional service firms to connect with our audiences in a whole different way.

Now 15 years later, we’re part of a growing global network of more than 19,000 bloggers who inform and provide insights into the legal and business issues affecting our respective audiences.

Indeed, the technology has taken a quantum leap for us take advantage of LexBlog’s SaaS technology including RSS, SEO, and social media tools to power our blog.

But the critical issue on which we focus has stayed the same: adequate income for employees at retirement.

This blog, then, and our firm's services have one basic objective: to help employers and employees get their retirement plans from where they are now to where they need to be.