INDUSTRY Resources

Avoid Unwanted Surprises With Quality Benefit Plan Audits

The U.S. Department of Labor conducted a 2015 study of the quality of Employee Benefit Plan (EBP) Audits for the 2011 filing year. They looked at who audits EBPs, the size of CPA firms performing them, the proportion of each CPA practice devoted to them and the overall quality of audits performed. In doing so, they found that 61% of the audits performed were in line with Generally Accepted Auditing Standards (GAAS). However, 39% of the audits contained major deficiencies which could jeopardize plan qualification and result in rejection of Form 5500.

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Definition of compensation in retirement plans

While most Plan Sponsors can tell you off the tops of their heads what their Plan’s eligibility requirements are, the formula for calculating employer contributions and the types of withdrawal features in their Plan; many can’t tell you what their plan’s definition of “Compensation” is. Using the wrong definition of compensation to determine contributions is among the top 5 most common mistakes Plan Sponsors make in operating their retirement plan according to the IRS.

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Beef up retirement savings with a cash balance plan

Imagine your 401(k) plan on steroids. Imagine being able to contribute four times more than your current 401(k) limit. Imagine having an balance where investments are managed for you and the investment return is guaranteed. And imagine, upon termination or retirement, taking your balance as a tax-free rollover into an IRA. Well, your imagination may turn to reality, as Cash Balance Retirement plans now provide the above advantages, while opening the door to those looking to sock away a lot more in pre-tax contributions into their ERISA protected retirement savings accounts.

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Opeb news and notes

Accounting standards and actuarial guidelines are subject to constant review and revision over time, with a focus on improving the clarity and accuracy of reporting. At Burke Group our commitment is to remain at the forefront of these changes. Recently two new guidelines have been published which could significantly impact the liabilities, reporting, and potentially how employers choose to structure their benefits in the future.

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Churn ‘n’ burn

I have been a big fan of Dilbert comic strips since my youth. There is something amusing about a micromanaged, white collar worker with a big head and his little pet dog who seems to know it all. Most everyone will agree that creator Scott Adams writes some pretty funny stuff.

Over the years, Scott’s comic strips have poked fun at financial advisors, mutual funds and the financial services industry as a whole. Here are a few examples in ascending order by date:

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Don’t celebrate too quickly

401(k) participants continue to demonstrate their inability to make wise investment decisions. I randomly sampled several 401(k) plans and found that average participant rate of return was 7% to 10% below the S&P 500’s 30% rate of return for 2013. Some of the individual investments in the plans sampled had 40% or greater returns for the year, yet participants still failed miserably.

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