Archive | August, 2013

 What Exactly is an Eligible Participant on a 401k Plan?

August 31, 2013

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401k auditHCE. ROBs. Fiduciaries. Internal controls. There’s plenty of confusing jargon when it comes to 401k plans. One confusing term that comes up again and again when managing your company’s 401k plan is “eligible participant”. It is, however, an important term to understand- especially considering that the number of “eligible participants” in your plan will determine whether or not you are required to undergo an annual 401k audit performed by an independent, outside accounting firm.

Depending upon the number of eligible participants in your 401k plan on the first day of the plan year, the plan will be filed in Form 5500 as a “small” or “large” plan. Large plans are required to be audited annually by an external accounting firm; small plans are not.

Determining the number of “eligible participants” in your plan is by no means as easy as counting all active employees who are participating in the offered 401k plan. In fact, when calculating the number of “eligible participants” in your plan, you may be including terminated employees and even spouses of former employees.

 

So, what defines an eligible participant?

 Anyone who is eligible to participate in the 401k plan is considered an “eligible participant”.

 This includes: 

  • Active employees who are eligible to participate in the plan and are participating in the plan
  • Active employees who are eligible to participate in the plan but have chosen not to
  • Terminated/ resigned employees who still have a balance on their account on the first day of the plan year
  • Retired former employees who still have a balance in their account on the first day of the plan year
  • Beneficiaries of deceased employees who are receiving, or are entitled to receive, benefits from the plan

Other eligibility requirements (length of time at company, sign-up deadlines, etc.) should be clearly explained in plan documents and all policies should be followed carefully in order to avoid a non-compliance issue. Any changes to eligibility requirements, including open enrollment changes, should be reviewed by the plan administration team and documented with legal amendments and proper notification to participants.

 

How many eligible participants does a plan need to qualify as a “large” plan requiring an outside 401k audit?

Technically, any plan with over 100 eligible participants is considered a large plan under 401k rules. However, due to the “80-120 participant” rule, a plan that was filed in the previous year as a small plan and still has 120 or less eligible participants can continue to file as a small plan until there are more than 120 eligible participants. So if your plan has never before required an external audit, it won’t need to do so until there are 121 eligible participants on the first day of the plan year.

 

Read more about defining the “eligible participants” in your 401k plan.

The best 401k audit firms will be able to answer all of these questions for you, and guide your company through a seamless, efficient audit. Our e-book, “The Guide to 401k Audits”, was written to guide you the process of preparing for an annual 401k audit. Download it here.



401k Audit Guide

 

Summit CPA Group is located in Fort Wayne, Indiana.  Due to the advancement of technology, we can audit 401k plans all across the United States.  Currently we are licensed in Indiana, Illinois, Michigan, Ohio, Florida, New Mexico, Texas, California, Alabama, Arizona, Delaware, Idaho, Mississippi, Minnesota, Pennsylvania, New Jersey, Virginia and North Dakota.

If you do not see your state above, press the “Contact a 401k Auditor” link above and include in the message the State you reside in.  We will give you a call back and let you know if we can get licensed in your state.  Each state varies on how long it takes to get licensed, so contact us today.

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Employment-Third Circuit Rules That Plaintiff’s Discrimination and Retaliation Claims Under Title VII Do Not Survive Summary Judgment

August 29, 2013

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In Verma v. University of Pennsylvania, No. 12-2799 (3rd Cir. 2013), the plaintiff, Sandhya Verma ("Verma"), appeals the district court’s grant of summary judgment to her former employer, defendant University of Pennsylvania (the University"), on her discrimination and retaliation claims….

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Employment-Sixth Circuit Rules That An Employer May, Without Violating the FMLA, Enforce Its Procedure for Informing The Employer Of An Absence

August 28, 2013

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In Srouder v. Dana Light Axle Manufacturing, LLC, No. 12-5835 (6th Cir. 2013), the plaintiff, Matt White ("White"), appeals from the district court’s order granting summary judgment to White’s former employer, defendant Dana Light Axle Manufacturing, LLC ("Dana"). In this…

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Employment-Sixth Circuit Rules That An Employer May, Without Violating the FMLA, Enforce Its Procedure for Informing The Employer Of An Absence

August 28, 2013

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In Srouder v. Dana Light Axle Manufacturing, LLC, No. 12-5835 (6th Cir. 2013), the plaintiff, Matt White ("White"), appeals from the district court’s order granting summary judgment to White’s former employer, defendant Dana Light Axle Manufacturing, LLC ("Dana"). In this…

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Employment-Sixth Circuit Rules That An Employer May, Without Violating the FMLA, Enforce Its Procedure for Informing The Employer Of An Absence

August 28, 2013

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In Srouder v. Dana Light Axle Manufacturing, LLC, No. 12-5835 (6th Cir. 2013), the plaintiff, Matt White ("White"), appeals from the district court’s order granting summary judgment to White’s former employer, defendant Dana Light Axle Manufacturing, LLC ("Dana"). In this…

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401k Audit Regulations in 2013

August 27, 2013

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401k Audit Rules and RegulationsThe IRS and Department of Labor are continuously updating 401k rules and regulations. When preparing for an annual 401k plan audit, it’s important to stay current on the government’s requirements for company 401k plans in order to ensure your 401k audit goes as smoothly as possible.

As expected, there have been few changes to 401k audit regulations in 2013.

The two defining requirements for a 401k plan to be considered a “large” plan and therefore require an external audit remain the same: 

  • The plan must have more than 100 eligible participants on the first day of the plan year (or 120 if it has never been required to undergo an external audit before- for more information, please see our blog post “120 is the Magic Number for 401k Plan Audits”)
  • The plan must have assets that are held in a trust (by law, all 401k plans are required to have their assets held in trust)

 

What’s New in 2013?

 Cost-of-Living Adjustments (COLAS)

 On October 18, 2012, the IRS announced cost-of-living adjustments that would take effect on January 1, 2013. These changes will increase the dollar limit on defined contributions and benefits of many 401k plans, as the changes in the cost-of-living index will trigger the adjustment of plan limits.

 Changes include: 

  • Increased elective deferral limit for 401k participants, from $17,000 to $17,500
  • Increased overall limit for defined contribution plan deferrals, including deferrals from all sources, from $50,000 to $51,000
  • Increased amount of employee compensation limit that can be considered when calculating contributions to defined contribution plans, from $250,000 to $255,000

  

Increased IRS Focus on 401k Compliance

 When speaking at a recent conference for the American Society of Pension Professionals & Actuaries, Monika Templeman, the IRS Director of Employee Plan Examinations, explained that the organization continues to focus on improving 401k plan compliance, as 401k plans are the most widely used type of retirement program in the country.

 “More than half of the million plus plans are 401ks,” said Templeman.

 Demonstrating the importance the IRS is placing on 401k compliance, the office’s Employee Plans Office this year released a 401k electronic questionnaire (its first ever)  to select sponsors. A report on the results of that questionnaire, along with additional insight from Templeman, can be found on the IRS website. Click here to access it.

 

Learn More About 401k Audit Rule Changes in 2013

 Download our e-book, “The Guide to 401k Audits”, written by skilled and knowledgeable 401k audit specialists.

 


Summit CPA Group is located in Fort Wayne, Indiana.  Due to the advancement of technology, we can audit 401k plans all across the United States.  Currently we are licensed in Indiana, Illinois, Michigan, Ohio, Florida, New Mexico, Texas, California, Alabama, Arizona, Delaware, Idaho, Mississippi, Minnesota, Pennsylvania, New Jersey, Virginia and North Dakota.

 If you do not see your state above, press the “Contact a 401k Auditor” link above and include in the message the State you reside in.  We will give you a call back and let you know if we can get licensed in your state.  Each state varies on how long it takes to get licensed, so contact us today.

 

 

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ERISA-Eighth Circuit Rules That Plaintiffs’ Claims Under ERISA To Prevent The Plan From Decreasing and Recouping Excess Benefit Payments Fail

August 27, 2013

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In Pilger v. Sweeney, No. 12-2698 (8th Cir. 2013), the plaintiffs are 13 retired union plumbers who were members of the former Iowa Local 212 (the Plaintiffs"). The Plaintiffs receive retirement benefits from the Plumbers and Pipefitters National Pension Fund…

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What Will An Investor Coach Do For You?

August 26, 2013

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The ‘new’ trend, maybe not so ‘new’, is that of coaches. I have seen examples of this as business coach, voice coach, career coach, health coach and in my case the investor coach. There are many others but you get the idea. Most of us associate coach with sports. Our Green Bay Packers have many […]

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ASPPA & NTSAA Request Clarification by IRS on Certain Severance, Vesting Definitions

August 26, 2013

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A statement by ASPPA and NTSAA regarding the sample language issued by the Internal Revenue Service (IRS) in the Listing of Required Modifications (LRMs) for pre-approved 403(b) plans.

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ERISA-First Circuit Reverses District Court Decision Denying Claim For Long Term Disability Benefits

August 26, 2013

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In Gross v. Sun Life Assurance Company of Canada, No. 12-1175 (1st Cir. 2013), the First Circuit Court of Appeals (the "Court") was faced with the question as to whether the "safe harbor" exception to the ERISA preemption applies to…

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