401k Audits

From time-to-time issues arise in the administration of an employee benefit plan. It is bound to happen given the sheer number of rules and regulations plan sponsors must adhere to. To facilitate resolution the IRS has established the Employee Plans Compliance Resolution System where plan sponsors can go to resolve open issues including prohibited transactions. This happens when a transaction occurs between a plan and a disqualified person. Such transactions can arise from plan loans to certain participants and even fiduciary self-dealing.

Many Atlanta businesses offer retirement plans as a benefit to employees to encourage savings and as a vehicle for the tax-free investment of contributions. These plans are one of the most effective means of encouraging participation and helping employees build a solid financial foundation for retirement. In fact, they are so effective that the Setting Every Community Up for Retirement (SECURE) Act implemented several changes to incentivize businesses to offer retirement plans. While offering a plan is essential to saving, plan sponsors should also maintain communications with participants to meet compliance requirements and to disburse important information on benefits.

As the end of the year quickly approaches there are only a few weeks left before the holidays. For many Atlanta businesses, this is a time to analyze financial performance, review operational benchmarks, assess vendor relationships, review financing and credit opportunities, and outline a path forward in 2021. There is little doubt that many plans for 2020 were interrupted by the COVID-19 pandemic requiring mid-year adjustments.

The COVID-19 pandemic created a host of new challenges and issues never before experienced by Atlanta business owners. It started with forced business closures and stay at home orders and has transitioned to new safety protocols, limits on gathering sizes, and more. Many businesses have elected to transition to a remote work environment to protect against virus transmission. Despite these measures,  it was recently reported the seven-day rolling average of new Coronavirus cases has increased 42% since October 2nd which likely means additional restrictions.

As plan sponsors are quickly approaching the October 15th filing deadline the focus is on taking care of last-minute details with the plan auditor. Ensuring all questions are answered and any last-minute information is provided is essential in the final weeks. Once the deadline passes, plan sponsors will then focus on ensuring compliance with the changes mandated in the SECURE and CARES Act by the end of the year.

The SECURE Act implemented in late 2019 and the CARES Act which passed earlier this year outlined several changes to how retirement plans are required to operate. While adoption of certain changes is optional, others are not, requiring the plan sponsor to make plan document amendments.

The COVID-19 pandemic has had a significant impact on Atlanta area businesses. The forced business closures which triggered an immediate and unexpected drop in revenue to the challenges of reopening while cases surged across Georgia. New terms such as social distancing and personal protective equipment have become part of the daily conversation. Benefit plan sponsors have also had to react to the various changes implemented by the CARES Act such as increased participant loan limits, Coronavirus Related Distributions, and a waiver of Required Minimum Distributions (RMD) in 2020. Although helpful, the changes have required plans to modify how they operate, and in some cases, adopt new plan amendments to maintain ERISA compliance.

The COVID-19 pandemic has taken its toll on Atlanta businesses and residents. The initial round of forced business closures and stay at home orders required many businesses to terminate, furlough, or reduce employee hours. Driven mainly by reduced demand for products and services these changes were needed to ensure many businesses could survive. Since the restrictions were lifted and businesses reopened many former employees were rehired.

On May 21, 2020, a new DOL Final Rule (the Rule) was approved which permits employers to post relevant disclosures online or deliver to employees through emails, as a default. This change is expected to make it easier and less costly for employers while making important information easily accessible for employees.

At the end of last year, President Trump signed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which made changes to retirement saving opportunities and benefits for employees and other individuals. There has been a significant concern for some time that American’s are not saving nearly enough to fund their retirement. This is attributed to limited access to retirement plans, plans that lack automatic enrollment, poor plan education, and other saving restrictions.