The Importance of Proactive ERISA Legal Compliance Reviews

Periodically, the IRS will audit qualified retirement plans to ensure compliance with ERISA and federal regulations. Having taken the time to be proactive and conducting an internal legal compliance review before the IRS comes calling means you not only have confidence in your plan’s ability to pass an audit, but you’ll be prepared to hand the IRS agents the documentation they need. Preparation makes the process less difficult for everyone involved, you’ll avoid costs associated with scrambling to put together documentation last minute, and you’re more likely to avoid fines and other complications associated with a non-compliant benefit plan.

Internal Legal Compliance Reviews

Fiduciaries have a responsibility to plan participants to ensure the plan is operating well. Thus, regular internal legal compliance reviews will help ensure that not only is the plan following federal law, but that it’s also following the plan’s governing documents.

In general, a review takes a month or two, and sometimes longer for a more complex situation. The level of detail you dive into plan documents and procedures is also likely to guide how long it takes to conduct a compliance review. Even a plan that hasn’t changed in several years is still a good candidate for a review. Tax laws, legislative updates, and regulations change, and plan documents should be updated to reflect the latest rules. Further, processes change as personnel and technology changes and you want to ensure those processes comply with the law and are reflected in plan documents.

One example of a detailed aspect of a compliance review is to have the people or companies handling benefits and payroll meet up and review current wage types. The goal is to confirm that the wages offered align with the plan document and the timing of deposits is in line with the law. Further, the Department of Labor and IRS periodically update details such as the definition of compensation, which could impact how tax-advantaged retirement plans are calculating matching, confirming eligibility, and identifying highly compensated individuals.

Timing Your Review

The timeliness of these reviews can vary from annually to every few years, but should certainly be conducted when there are major changes to the plan, to regulations, or to the company. It’s a good habit to conduct a review every few years to ensure documentation, benefit calculations, and plan processes are in good order and accurately reflect laws and plan goals.

Another good time to review plans is when your business is involved in a merger or acquisition. In these cases, you’re likely working to blend another company’s benefits plans into your own. Having a clear understanding of each plan and setting them up side by side can help you correct problems before merging. It also gives you a useful tool to show employees how their new benefits compare with the old.

If you’d like help conducting a legal compliance review of a retirement plan or any other benefit plan your company offers, reach out to Hall Benefits Law. We can help conduct regular compliance reviews as well as help handle audits when the IRS comes to call. Call our office today at 678-439-6236 or visit the Hall Benefits Law website.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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