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Strong Internal Controls Mitigate Risks for ERISA Plan Audits

Posted by Corey F. Schechter | Sep 02, 2013 | 0 Comments

CONTRIBUTING AUTHOR KRISTINE M. CUSTODIO, ADVANCED CERTIFIED PARALEGAL

On August 29, 2013, the Internal Revenue Service hosted a phone forum titled, How to Prepare for an IRS Employee Plans Audit.

IRS Director of Employee Plans Examinations, Monica Templeman, Esq., emphasized that strong internal controls related to a plan sponsor's internal operations, such as the payroll department complying with the written plan provisions as they relate to compensation and determining eligible employees for plan participation, are crucial to reducing risk for common errors identified during the IRS examination process. Templeman listed the following common errors during IRS examinations:

  • Non-amenders
  • Definition of “compensation”
  • Excluding eligible employees/including ineligible employees
  • Plan loans (sponsor's failure to withhold loan payments)
  • Hardship distributions

Further, the IRS recommends that plan sponsors improve compliance by implementing annual plan check-ups, especially if the plan has not been updated in the past few years. During a plan check-up, determining if a plan's operations are based on the written terms of the plan may mitigate potential issues identified during an IRS examination and may also allow for use of the Employee Plans Compliance Resolution System (EPCRS) Self Correction Program.

For more information on IRS phone forums, visit http://www.irs.gov/Retirement-Plans/Phone-Forums-Retirement-Plans. Additional resources may be found on the IRS website at http://www.irs.gov/Retirement-Plans.

If you would like a plan check-up or have questions about ERISA plan compliance, please contact one of our attorneys to discuss further.

About the Author

Corey F. Schechter

Corey Schechter practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Employment and Labor Law.

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