Compliance January 31, 2006

IRS to Step Up Retirement Plan Examinations

January 31, 2006 (PLANSPONSOR.com) - The Internal Revenue Service will increase examinations of companies' retirement plans this year, with plans to perform focused exams on about 9,000 companies of all sizes in the next nine months.
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Newsday reports that the IRS will examine traditional pensions, 401(k) plans and profit sharing plans, looking for those that cheat workers or the government, or that are not in compliance with federal regulations.

Under the examination process, IRS agents will review the pension plan documents of each company being examined to make sure they are up-to-date. According to Newsday, the agents will then focus on whether employers are properly handling various duties including:

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  • notifying workers of their eligibility to join the plans;
  • matching employee contributions to 401(k) plans;
  • calculating traditional pension benefits;
  • investing retirement plan offerings;
  • vesting workers; and
  • distributing benefits at retirement.

Bob Henn, the IRS’ Northeast area manager for employee plans, told Newsday that instead of looking at all aspects of a company’s plan, the agents will focus on the plan’s documents, its internal controls and a few other key issues.

Sy Goldberg, an attorney who is a member of the IRS’s Northeast Pension Liaison Group, believes a lot of companies will not be in compliance.   “They may not have good advisers, who may not file the forms correctly or bring in the employees correctly,” he told the newspaper.

Products January 30, 2006

Principal Enhances Guide to Fiduciary Duties

January 30, 2006 (PLANSPONSOR.com) - To address client concerns about meeting Department of Labor and IRS requirements for their retirement plans, The Principal Financial Group has enhanced its guide to fiduciary duties.
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The enhanced guide, titled “Understanding and Managing Fiduciary Responsibility: How the Principal Financial Group can Help,” now offers checklists to walk plan sponsors and financial professionals through the processes of operating a plan and complying with fiduciary responsibilities, the Principal said in an announcement (See   Principal Releases New Fiduciary Guide ).

The Principal also introduced a new tool, titled “How to Create a Documented Process,” which provides education on the importance of documenting the decisionmaking process and offers sample documents for plan sponsors.

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The enhanced guide and new tool can be found in the Principal Sponsor Service Center at  www.principal.com .

In addition, the Principal has released a white paper, “Fiduciary Issues for Financial Professionals Under ERISA,” to educate financial professionals on how the duties they perform make them a fiduciary to their clients’ retirement plans.   The white paper is co-authored by Fred Reish and Bruce Ashton, of Reish Luftman Reicher & Cohen and is available through the Service Center.

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