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What you need to know about Employee Benefit Plan Issues

March 23rd, 2011 by Mary Stucke

We hosted our first GBQuarterly of the year on March 22, 2011. The topic was Employee Benefit Plan Issues and was presented by Mike Kozlowski, Director, Assurance & Business Advisory Services at GBQ Partners LLC and Brian Hanna, Senior Relationship Manager at Everhart Financial group, Inc.

The key issues discussed were:

Common Errors in Plan Administration

  • In GBQ’s experience the common errors in plan administration relate to:
    • Eligibility of employees
    • Incorrect compensation used when determining 401(k) withholdings
    • Proper administration and issuance of loans
    • Hardship withdrawals
    • Timely remittance of employee contributions to the plan

Discrimination Testing

  • It is important for employers to understand the impact of discrimination testing.  Discrimination testing limits the amount that a highly compensated employee (HCE) can contribute to the plan.  HCE is defined as employees who owned 5% or more of the employer and/or compensation in excess of $110,000 for the prior year.  HCEs can contribute: a) 2% more than non-highly compensated employees (NHCE) if NHCE average is 2% or more or b) 50% more than NHCE if NHCE average is less than 2%.
  • The seminar also presented a few ways to assist with discrimination testing:
    • Automatic enrollments into the plan
    • Save Harbor Plan
    • Employee education of the plan
    • Do not exclude bonuses or other compensation from withholdings as total compensation is used for the calculation.

Department of Labor (DOL) Auditing Your Auditors

  • Recently the DOL is concerned about audit quality and has begun a program to audit the auditors of the plans.  The DOL is performing various audits, inspections and reviews for auditors who are auditing more than 200, between 100 – 199 and less than 100 audits, respectively.  If the audit firm has deficiencies in the audit that they performed and they are not corrected, the DOL will reject the filing of the 5500 and impose penalties on the Company.