GEORGE JOHNSON & COMPANY
Dear Clients and Friends,
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
- 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?
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.
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.
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.
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
Join GJC in welcoming our newly appointed Staff Accountants and Interns…
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.
Welcome Alexandra, Peter, Austin and Xavier to
the GJC Team!
Martin Luther King, Jr. Volunteer Service Day 2019
The GJC Team at Forgotten Harvest, Detroit
GJC is an Independent Member of the BDO Alliance USA