



		Corporate Transactions

		Retirement Plans

		ESOPs

		Welfare Benefits Plans

		ERISA Exempt Plans

		Legal Compliance Audits For Benefit Plans

Legal Compliance Audits For Benefit Plans

Compliance with the myriad complex regulations issued under ERISA and the Internal Revenue Code is a daunting task for companies of every size and industry, particularly in a legislative climate that requires a continuous monitoring of regulatory changes. Plan fiduciaries need to ensure operational compliance by administering their plans in accordance with their terms and consistent with governing law.

A failure to comply could be quite costly, if not outright disastrous. A noncompliant plan is exposed to the risk of plan disqualification with its attendant adverse income tax consequences for plan participants, as well as the imposition of significant civil penalties.

Due to the ever-increasing complexity of the rules that govern employee benefit plans, it is not at all unusual to find situations where operational errors occur. Even under the best of circumstances, where human resources personnel who are charged with the responsibility of monitoring the company’s employee benefits plans perform their duties in a conscientious and prudent manner, mistakes will still happen.

Janich Law Group has considerable experience counseling its clients as to how to prevent such costly plan errors, and if any such problems are found, to assist them in correcting the errors in a manner which will give the plan fiduciaries assurance of the plan’s continued tax exempt status. Once errors or problems are discovered through the audit process, we assist the client to ascertain the scope of the errors and decide the appropriate course of action.

Some minor problems may be correctable internally. Other errors require a formal correction process through administrative agencies. Depending upon the nature of the problem, redress of a plan error may be accomplished by using the Employee Plans Compliance Resolution System (EPCRS), a correction program for Internal Revenue Code violations that is administered by the IRS, or through the Voluntary Fiduciary Correction Program (VFCP) or Delinquent Filer Voluntary Compliance Program (DFVCP), both of which are corrective programs for ERISA violations that are administered by the Department of Labor.

How is a legal compliance audit performed?

The process starts with an audit of a client’s employee benefit plans including: defined contribution plans, defined benefit plans, welfare benefit plans, deferred compensation plans, executive compensation arrangements, church plans and plans sponsored by tax-exempt organizations.

The audit is designed to identify any potential problems that may exist and consists of:

• review of all plan documents, including Summary Plan Descriptions (SPDs), to ascertain whether they comply with all regulatory requirements;

• review of plan disclosures to governmental agencies;

• review of plan communications to employees;

• review of previously performed discrimination tests;

• ascertain whether the health plan includes plan features that contain the most up-to-date cost-cutting measures

Upon completion of the audit the client is provided with a report identifying issues that need to be addressed, including those in need of correction through a formal correction program, or internally to ensure plan operational compliance. Additionally, at the client’s request, a procedural manual may be provided to assist in administering the plan.

How frequently should a plan audit be performed? What is the cost?

A plan audit should be performed at least once every few years. The charges for conducting a plan audit may be paid on a flat fee basis with the amount depending on the scope of services required. This sum is most certainly be far less than what a plan sponsor would expect to incur in civil penalties following an IRS or DOL plan audit. The cost of preparing a plan for submission through one of the corrections programs is billed on an hourly basis. An estimate of the cost of preparing a procedures manual will be provided to the client upon request at the conclusion of the plan audit.