Compliance February 2, 2015

Internal Controls Can Help Prevent Retirement Plan Fraud

The IRS has suggested a list of helpful internal controls for retirement plan sponsors.
Reported by

The Internal Revenue Service (IRS) said its Employee Plans Compliance Unit (EPCU) Fraud project revealed a significant percent of plans experienced fraud losses due to weak internal controls and risky investments.

The agency says good internal controls can help plan sponsors protect assets from accidental loss or loss from fraud, ensure the reliability and integrity of financial information, ensure compliance with various laws and regulations, promote efficient and effective operations, and accomplish the plan’s goals and objectives.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Helpful internal control steps the IRS suggested retirement plan sponsors should take include:

  • Ensure the plan’s books and records are checked regularly by an outside third party;
  • Trace deposits and payments to original documents;
  • Have someone else review work when only one employee is in charge of plan operations;
  • Ensure the plan sponsor’s fidelity bond is current and in a sufficient amount;
  • Keep blank checks locked up;
  • Have outside professionals verify transactions;
  • Ensure any loans to third parties are in writing with all forms properly completed, adequately secured, and all interest payments made on time;
  • Reconcile bank, investment and account statements regularly;
  • Require two original signatures on checks or forms that involve plan assets;
  • Keep copies of plan documents including Form 5500 series returns and determination letters;
  • Ensure that payments are sent to correct vendors;
  • Request product and service providers promptly remove employees or trustees with signature authority after they retire or leave employment; and
  • Verify participants who are supposed to receive loans or other distributions actually received them in the correct amounts.

The agency also suggested some steps plan sponsors can take to avoid getting involved in a risky investment:

  • Be prudent in investments;
  • Question investments in hard-to-value assets including hedge funds and foreign assets;
  • Ensure that investment advisers act according to plan sponsor instructions and monitor their work regularly; and
  • Consult with a benefits professional to ensure that administrative procedures are in place to prevent fraud or dishonesty in the retirement plan.

More information about preventing retirement plan fraud is here.

Compliance February 2, 2015

IRS Offers Reference Lists for Plan Qualification Requirements

The IRS recommends including reference lists when applying for a retirement plan determination letter.
Reported by

The Internal Revenue Service (IRS) offers fillable reference lists of changes in qualification requirements for retirement plans.

Reference lists are tools to help plan sponsors ensure that their plan document incorporates all relevant mandatory and optional changes in plan qualification requirements. Each reference list contains items that are new to the cumulative list for a given year.

Get more!  Sign up for PLANSPONSOR newsletters.

For determination letter applications, a plan sponsor with an individually designed plan submitted on Form 5300 would complete the five reference lists for the five years of its remedial amendment cycle (RAC). These are the years covered by the cumulative list applicable to the submission. An employer adopting a volume submitter plan and submitting on Form 5307 would complete the six reference lists for the six years in its RAC.

For interim amendments, the IRS recommends completing each year’s reference list to check whether the plan document is up-to-date. If a plan sponsor missed any relevant amendments, its plan may have a qualification failure and it must correct this error.

Although not mandatory, the IRS encourages plan sponsors to include completed reference lists with determination letter applications. This will facilitate IRS review of the plan document.

The reference lists and instructions for how to complete them can be found here.

«