EMPLOYEE BENEFITS UPDATE SUMMER 2019

GEORGE JOHNSON & COMPANY

SUMMER 2019


 

Dear Clients and Friends,

Welcome to our Summer issue of the GJC Advisor, Employee Benefit Plans edition.
Norma EBP Seminar

In May, we hosted our annual Employee Benefit Plan Client Seminar. For the first time, the seminar was held at the Corner Ballpark (former Tiger Stadium). Norma Sharara of BDO USA, was our keynote speaker who shared current updates including:

  • Tax reform and other changes affecting retirement plans in 2019; new IRS procedures for plan corrections, amendments and approvals
  • Fiduciary investment advice rule state of play; current DOL enforcement focus areas; Form 5500 updates
  • PBGC missing participant program for terminating defined contribution plans; new mediation program for defined benefit plans
Additionally, investment management guest speaker, Corey Voorman of Berndt & Associates, addressed key issues and common questions such as:
  • Are all Target Date Funds created equal?
  • Are your investment options structured specifically for your plan’s participant demographics?
  • Stable Value Vs. Money Market Funds. Which is right for you?
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EBP Corey Voorman AIF bio.docx
If you are interested in receiving information from our seminars, contact Rodelyn Frijas at rfrijas@gjc-cpa.com.
Following the seminar, our accountants continued training on reporting updates as it relates to the industries we service. The continued educational programs ensure that we use the most current standards and practices.
We hope you enjoy this Employee Benefit Plan edition of the GJC Advisor. As always, if you have any questions, feel free to contact us.
Sincerely,
GJC
IRS EXPANDS SELF-CORRECTION AND DETERMINATION LETTER PROGRAMS FOR RETIREMENT PLANS
Summary

The IRS recently expanded two existing programs for tax-qualified retirement plans – the Employee Plans Compliance Resolution System (EPCRS) and the determination letter (DL) program for individually designed plans. Generally, an individually designed plan is a retirement plan drafted to be used by only one employer. A DL expresses the IRS’ opinion on the tax-qualified status of the plan document. These new changes to the EPCRS and DL programs could be a great help to employers, since they offer opportunities to increase compliance while reducing costs and burdens.

Employee Plans Compliance Resolution System (EPCRS)

EPCRS is an IRS correction program that has existed since 1992. Its purpose is to give employers a path to voluntarily correct plan mistakes at a cost that is less than what it would be if the failure was caught by the IRS on audit. For some errors, employers can simply self-correct and keep documentation in their files under the Self Correction Program (SCP) component of EPCRS. But other (more serious) types of failures require a formal Voluntary Correction Program (VCP) application seeking IRS approval, which also requires paying a user fee of up to $3,500.

With each new iteration of EPCRS, the IRS has expanded the types of errors that qualify for self-correction. Rev. Proc. 2019-19 significantly expands SCP. The current iteration responds to requests from the retirement plan community for self-correction of a greater number of more common missteps without having to file a VCP application and pay a user fee (where the cost of the filing often outweighed the cost of correction). Beginning April 19, 2019, employers with tax-qualified retirement plans and 403(b) plans can now self-correct more plan document and loan failures and retroactively amend plans to fix more operational failures without filing anything with the IRS. Employers can use the new SCP features immediately.

HEALTH PLAN HELD TO SAME ERISA FIDUCIARY STANDARDS AS RETIREMENT PLANS

The U.S. Department of Labor (DOL) recently asserted against a not-for-profit health plan sponsor breaches of Employee Retirement Income Security Act (ERISA) fiduciary duties and prohibited transactions for allegedly allowing the plan to pay excessive fees to its service providers.

Notwithstanding the fact that the DOL lost in a federal district court, this case reminds health plan sponsors that their ERISA fiduciary duties – including selecting and monitoring service providers and their fees – should be viewed essentially the same way as their retirement plan fiduciary duties. Even if employers outsource health and welfare plan administration (which is very common), this case confirms that employers still have a duty to monitor co-fiduciaries and plan service providers and to make sure that the plans do not pay excessive fees.

EMPLOYER’S BUSINESS INSURANCE DID NOT COVER ITS FAILURE TO PAY EMPLOYEE BENEFIT PLAN PREMIUMS

Many employers carry general business liability insurance with fiduciary clauses to hedge against potential losses that may result from negligent acts of some sort committed by their employees. But employers may be surprised to find that the broad policy terms of their fiduciary clauses do not cover as much as they thought, especially when a particular claim is filed. A construction company with 150 employees recently learned that lesson the hard way in a federal case. The court ruled that it is not reasonable to expect business liability insurance (covering negligence or breaches of fiduciary duties) to cover claims where the employer forgot to pay its bills for employee life and disability insurance premiums.

DEADLINE APPROACHES FOR REMEDIAL AMENDMENTS FOR 403(B) PLANS

Maintaining compliance for 403(b) retirement plans historically has been challenging given the lack of historical regulatory oversight, guidance from the Internal Revenue Service (IRS), and non-profit organizations’ limited resources. But the IRS has taken steps to address this, including publishing a list of providers offering pre-approved prototype plans and creating a remediation period ending in March 2020 for sponsors to self-correct non-compliant plan documents.
Background on 403(b) Compliance and Remediation
 

In 2007, IRS regulations were updated to require sponsors of retirement plans that fall under the Internal Revenue Code 403(b) to adopt and follow a plan document for their retirement plans as of January 1, 2009. Subsequently, relief was granted to extend this deadline to January 1, 2010. Before this time, many 403(b) plans did not have a plan document outlining specific operational and governing terms of the plan.

SPOTLIGHT

Join GJC in welcoming our newly appointed Staff Accountants and Interns…

Alexandra Sippala has over three years of related accounting experience.  Early this year, Alexandra was originally hired as an Intern with GJC. She graduated from Wayne State University with a Masters in Business Administration, focusing on Accounting. Keeping physically active is important to Alexandra. In her recent past, she was also a personal trainer at ProFitness Studio assisting clients with diet and exercise regimens. Additionally, she has a Bachelor of Biological Sciences majoring in Human Kinetics at the University of Guelph.
Peter Walkuski also started as an Intern with GJC. He graduated from Eastern Michigan University with a Master of Science in Accounting. His previous experience includes an internship as a Tax Accountant. In college, he was the treasurer, founding father and executive board officer for Theta Chi Fraternity. Peter has over three years of related accounting experience. In his spare time, he enjoys playing the guitar, sports and the outdoors.

GJC Summer Internships

Austin Reed is currently studying at Eastern Michigan University and is expected to graduate at the end of the year with a BBA in Accounting. He was honored as the recipient of the Emerald Scholarship, which is a 4-year award. He volunteers with the United Way of Washtenaw County in the income tax assistance program. In his spare time, Austin enjoys playing basketball, seeing live music, and trying out new restaurants with friends.

Xavier Robinson is the first to be hired under our HBCU (Historically Black Colleges and Universities) Legacy Internship Program.  He graduated from Florida Agricultural & Mechanical University (FAMU) with a Bachelor of Science in Business Administration, concentrating on Finance and minoring in Economics. Outside of work, Xavier enjoys exploring the city of Detroit, trying out different restaurants, listening to live music and watching movies.
FAMU is one of the largest schools contributing to the HBCU cause. It was established in 1887 and was founded by African Americans. The principal mission is the education of African Americans.

Welcome Alexandra, Peter, Austin and Xavier to 

the GJC Team!

COMMUNITY

Martin Luther King, Jr. Volunteer Service Day 2019

At GJC, we are dedicated to serve a positive purpose within our community. As part of our social responsibility for our commitment to community service, we participate in an annual volunteer day. Our largest volunteer event honors the life and legacy of Dr. Martin Luther King, Jr.
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Last January, our team spent the day volunteering different tasks at Forgotten Harvest. The nonprofit’s purpose is to relieve hunger in the Detroit Metropolitan community by rescuing surplus, prepared and perishable food and donating it to emergency food providers.

The GJC Team at Forgotten Harvest, Detroit


 

We hope that the contents of this issue of the GJC Advisor will provide you with valuable information. As always, if you have any questions or comments, please do not hesitate to share them with our team members.
This general information should not be acted upon without first determining its application to your specific situation. For further details on any article, please contact us.
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GJC is an Independent Member of the BDO Alliance USA