CASE STUDY (1)
How a Law Firm Determined Optimal Plan Design and Avoided Potential Audit Challenges
The Client’s Challenge:
The Partner in charge of the Firm’s 401(k) profit sharing plan wanted to know if their 401(k) plan had an optimal design in place or if other designs, particularly a cross-tested profit sharing allocation, would provide better savings opportunities for the Firm’s partners. The plan had been in existence for 16 years and had approximately 36 participants and the partner was concerned that the plan was no longer up to date. The Firm asked Berry Dunn’s Retirement Plan Solutions Group (RPS) to review the plan and determine their best course of action.
Compliance Review Results:
Berry Dunn RPS consultants ran detailed contribution projections as part of the CPR (Comprehensive Plan Review) for the Firm’s plan using the existent design and two other alternatives allowing the client to select the plan parameters most suitable for the Firm’s goals. After reviewing the alternatives all parties agreed that the Plan’s current design was still optimal as the Firm’s demographics were such that cross-testing would not provide any significant savings.
The RPS consultants also scrutinized the Plan documents and found inconsistencies that would likely be challenged upon audit. Fortunately, as a result of the CPR, the Firm was able to take action and rectify the inconsistencies with minimal costs as well as bring their plan up to date. This greatly reduced the risk of significant IRS penalties in the event of a future audit.
CASE STUDY (2)
Helping a Not-For-Profit Organization Identify Contribution Errors and Implement Processes to Meet Strict IRS/DOL Regulations
The Client’s Challenge:
A not-for-profit client needed to correct multiple operational errors in their qualified retirement plan. An internal audit had revealed that the organization was not operating the plan in accordance with the plan documents for several years. The employer was not following the terms of the plan document with respect to the definition of compensation, the limit on compensation for calculating employer contributions, and the application of the eligibility requirements. As a result, the client was at risk of incurring significant sanctions under the Audit Cap program upon an IRS plan audit.
Compliance Review Results:
The Berry Dunn RPS consultants worked closely with the client to navigate the best course through the IRS’s correction program and to calculate the corrective contributions required to rectify the situation. The corrections included calculating and depositing missed employee salary deferral contributions, employer matching contributions and the corresponding investment gain or loss. Once the problem was identified, the company was able to make the adjustments in a relatively short period of time given the complexity of the issues.
During the course of our work the consultants also discovered that the client was possibly not depositing employee contributions as frequently as required. They immediately brought this to the client’s attention with recommendations on how to make sure the plan was in compliance with the Department of Labor’s very strict rules regarding the frequency of employee contribution deposits.