GEORGE JOHNSON & COMPANY
Dear Clients and Friends,
As the Employee Benefit Plan industry continues to evolve, GJC is here to help you understand the changes necessary for you to be in compliance with the current regulations and help you meet your fiduciary responsibilities as plan sponsors. In this issue, we discuss utilizing data analytics; the Exposure Draft; FASB updates; and much more.
As part of our client seminar series, we will be hosting a presentation late winter of 2018. We will be discussing updates and hot topics on employee benefit plans, such as Form 5500 reporting and major administrative issues. Stay tuned for more information as we near the date.
If at any time you have questions, please feel free to contact us. We hope you enjoy this summer edition of the GJC Advisor.
Utilizing Data Analytics for Employee Benefit Plans
Data Analytics. The phrase brings to mind words like Big Data, Business intelligence, Analyze, Predictive Models, and Visualize. In this article, Kirstie Tiernan, a Forensic Technology Services Director with BDO’s Consulting Group, introduces the concept of using data analytics (commonly defined as the use of techniques and processes to extract, categorize and analyze data) as a tool for plan sponsors and discusses some of the key considerations that are the building blocks to understanding and using data analytics successfully.
The applications of data analytics to employee benefit plans (EBPs) are potentially endless. Imagine a large participant population with manual data entry of 401(k) deferrals that are performed by many payroll analysts. To internally test that the deferrals were input correctly, you could run a comparison of the data set of deferral changes (from the record-keeper) to the payroll data. As those familiar with administering plans know, EBPs can be prone to operational errors, which must be corrected by the sponsor. Finding these errors timely can reduce the sponsor’s cost of correction.
There is often a significant gap between the possibilities of what can be done with data and what a plan sponsor can realistically execute. Limitations on resources, time, budget, and software are all common factors that keep companies from taking full advantage of data analytics. Important keys to using data analytics include: start small, identify projects with clearly attainable objectives (to help obtain “buy-in” from others within the company), and build an environment that makes it easy to progressively add in additional datasets and analytics.
• What Data Do You Have?
• What Tools Do You Have (Or Need)?
• What Data Do You Need To Analyze?
• How Do You Ensure the Data Analysis Process Adds Value?
AICPA ASB Proposes Standard on Auditor Reporting on ERISA Financial Statements
In an effort to improve the communicative value and relevance of the auditor’s report, the
AICPA’s Auditing Standards Board (ASB) has issued the exposure draft, Proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (Exposure Draft).
The Exposure Draft would considerably transform the way EBP audits are performed and reported.
FASB Updates Presentation of Employee Benefit Plan Interest in a Master Trust
ASU 2017-06, Employee Benefit Plan Master Trust Reporting, amends the presentation and disclosure requirements for an EBP interest in a master trust. The amendments apply to EBPs within the scope of Accounting Standards Codification (ASC) 960, Plan Accounting – Defined Benefit Pensions Plans, ASC 962, Plan Accounting – Defined Contribution Pension Plans, and ASC 965, Plan Accounting – Health and Welfare Benefit Plans.
Updates to Retirement Plan Correction Procedures
The Internal Revenue Service (IRS) released Revenue Procedure (Rev. Proc.) 2016-51 updates to the Employee Plans Compliance Resolution System (EPCRS) in September 2016 replacing Rev. Proc. 2013-12. While the Rev. Proc. makes small, clarifying updates, it does not significantly change EPCRS’s substantive provisions. It incorporates changes described in Rev. Proc. 2015-27 and Rev. Proc. 2015-28. A summary of the key changes include:
Use of Forfeitures in Safe Harbor 401(k) and 403(b) Plans
In January 2017, the IRS issued a proposed regulation under which forfeitures may now be utilized to fund Qualified Non-Elective Contributions (QNECs) and Qualified Matching Contributions (QMACs), including ADP safe harbor matching and non-elective contributions (fully vested sources) at the time the amounts are funded. Previously, forfeiture amounts could only be applied to sources of funding subject to a vesting schedule, such as matching and/or profit sharing contributions. Additionally, certain pre-approved plan documents included language prohibiting the use of forfeitures to fund safe harbor contributions.
 QNECs and QMACS are special discretionary contributions allowed in the plan document that are contributed to employees, using specific formulas, as a method of correcting testing failures. However, since these contributions are 100% vested and are non-forfeitable at the time they are allocated to participant accounts, this previously meant that forfeitures could not be used to fund those types of contributions.
Substantiation of Hardship Distributions
The IRS recently issued two memorandums to its employee plan examiners indicating it is permissible for 401(k) and 403(b) plan sponsors and their service providers to rely on participants’ written summaries describing their financial hardships when processing hardship withdrawals from plans that apply safe harbor event rules.
GJC would like to congratulate its team members, David Esshaki, Manager and Eric Bonk, Staff Accountant, whom were recent recipients of the GJC Five-Star Award.
The goal of a five-star corporate culture is to provide the highest level of communication and service both internally among team members, and externally to its valued clients. Additionally, GJC’s Five-Star Award suggests that the way we treat each other, our internal clients, translates into how we treat our external clients. This continues to be a philosophy that our firm fully embraces.
Congratulations David and Eric for your hard work and team dedication!
Managing Partner, Anthony McCree recently contributed to Crain’s Detroit Business.
The article focuses on new accounting rules for Nonprofit Organizations to take effect in December 2017.
Read the full article here!
If you have any questions, please feel free to contact us.
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.