Caron Bletzer News

Many companies faced turbulent times during 2020 due to the unexpected impact on their businesses from COVID-19. As a result, many companies were forced to temporarily or permanently layoff or furlough employees during the year. Typically, plan sponsors would assess the facts and circumstances of significant turnover to determine if a partial plan termination has occurred for their retirement plan. However, Congress has recently provided temporary partial plan termination relief to Plan Sponsors. The Consolidated Appropriations Act 2021 was signed into law on December 27, 2020. Included below is a snipit from this recent ruling:

“A plan shall not be treated as having a partial termination (within the meaning of 411(d)(3) of the Internal Revenue Code of 1986) during any plan year which includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020.”

Plan sponsors should consider their employee turnover during the 2020 plan year, as well as the recent relief ruling to determine the impact, if any, to their retirement plan(s).

For more information regarding Partial Plan Terminations:

• EBPAQC Partial Plan termination Advisory: https://www.aicpa.org/content/dam/aicpa/interestareas/employeebenefitplanauditquality/resources/planadvisories/downloadabledocuments/partial-plan-terminations-ebpaqc-plan-advisory.pdf?utm_medium=email&SubscriberID=112287403&utm_source=EBPQAC21&Site=AICPA&LinkID=10983476&utm_campaign=EBPAQC_AlertSEP462&cid=email:EBPQAC21:EBPAQC_AlertSEP462:https%3a%2f%2fwww.aicpa.org%2fcontent%2fdam%2faicpa%2finterestareas%2femployeebenefitplanauditquality%2fresources%2fplanadvisories%2fdownloadabledocuments%2fpartial-plan-terminations-ebpaqc-plan-advisory.pdf:AICPA&SendID=337042&utm_content=Jan21

Whether your retirement plan has previously been audited or this is the first year your plan is requiring an audit, there are some helpful items your team can pull together prior to the plan audit:

• Were there any changes to the Plan or the Company during the year that should be communicated to your independent auditor, such as a payroll conversion or custodian transfer? Were there any issues your team ran into during the year, such as a code in payroll was not properly setup to have deferrals withheld on? Communicating these items to your independent auditor at the start of the audit will help with planning the audit.
• Review your permanent file to ensure you have copies of all of the executed and appropriate plan documents on file.
• Prepare the year end census file that includes all employees, their demographic information, and compensation and contributions for the year. Typically this file is also used for compliance testing purposes.
• Internally discuss the timing of the audit. If there are times during the year that are better for your team than others, this will be beneficial to be communicate to your independent auditor to help establish the timeline for the audit.

If your retirement plan has not been previously audited and you would like to discuss the audit process further with our team, we would be happy to have a phone call with you! Please feel free to contact our office at (603) 658-8000 to be connected to a team member.

This year, the Caron & Bletzer team took to our community to help spread a bit of holiday cheer to local families. Our enthusiastic team collected food and monetary donations to contribute to the Kingston, NH food bank. In addition, we donated Market Basket gift cards to local families so they could enjoy a Thanksgiving meal together. Lastly, we played Santa Clause and bought gifts for local children as part of the Kingston Giving Tree program. Many of us are working remotely from all over NH and MA, but we still are part of the Kingston community in spirit!

During 2020, there have been immediate and upcoming changes for the retirement plan industry that have affected and will continue to affect the plan operations. In addition to these changes, there are routine matters that Plan Sponsors will need to address before year end. Below are some things to consider as the year winds down:

• Have you made the timely disclosures to plan participants, such as the 404(a) fee disclosures or the Summary Annual Report? It may be helpful to have a checklist with the required disclosures to ensure they are all appropriately, timely provided. Some additional guidance from the DOL can be found here regarding disclosures: https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf
• For plan sponsors of defined benefit pension plans that utilized the CARES Act extension related to funding contributions, have you considered the timing of any additional payments? Payments were extended until January 1, 2021. As you are reviewing the funding schedule, it is important to consider that additional interest that will be owed on the delayed contributions.
• Have you reviewed the annual required amendments list to ensure your plan compliances with the qualification requirements? The required amendments list can be found here: https://www.irs.gov/retirement-plans/required-amendments-list
• Has it been decided if the 2021 plan year will be a safe harbor plan year for the Plan? If yes, has the safe harbor notice been timely distributed to participants? As a note, the SECURE Act eliminated the safe harbor notice requirement for non-elective safe harbor plans  for plan years beginning after December 31, 2019. For more information regarding the Safe Harbor notices, please visit the IRS website here: https://www.irs.gov/retirement-plans/notice-requirement-for-a-safe-harbor-401k-or-401m-plan
• Have  required adjustments been made for the changes in the IRS contribution plan limits for the 2021 plan year? Although there has been no change in the employee deferral limit, the maximum contribution limit increased by $1,000 to $58,000 (not including catch-up contributions). In addition, the employee compensation limit for calculating employer contributions increased by $5,000 to $290,000.

As plan sponsors are wrapping up their employee benefit plan filings and finalizing plan audits with their independent auditors, there are some things that should be considered related to subsequent event disclosures:

• Did the plan sponsor encounter significant layoffs, terminations, etc. that may result in a partial plan termination?
• Has there been a change in the financial status of the Company that may affect the ability of the Plan to continue as a going concern?
• Has the Plan implemented changes related to the CARES Act or Secure Act? If yes, have participants been utilizing these new features?
• Have there been decisions to freeze or terminate the Plan? Decisions to merge the Plan with another Plan?
• Have there any significant amendments to the Plan that may require disclosure? For example, cessation of the employer matching contributions?

The 2019 Form 5500 filings for calendar year plans is just about 5 weeks away! As of this time, there has been no extension announced for the Form 5500 deadlines. This is a great time to have these conversations with your audit team to ensure any additional testing and disclosure is appropriately addressed.

The AICPA has made the decision to delay the effective date of SAS 136 (Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA) to be effective for periods ending on or after December 15, 2021. However, early implementation of this standard is permitted. The new SAS results in changes to the ERISA reporting standards to more clearly define the auditor’s role and work performed for the audit. There were also changes to the requirements in performing an ERISA audit.

In your role as plan management, what changes can you expect?

• What historically has been known as a “limited scope audit” will now become a 103(a)(3)(c) audit.
• In order to add more clarity over the information audited by the independent accountant, there will be a two-part opinion to separately address the information covered by the certification and the information not covered by the certification.
• There will be expanded responsibilities for plan management.

What can you do to prepare:

• Revisit your procedures to ensure your trustee/custodian is able to certify ALL investments held by the plan.
• Review your plan documentation to ensure all documents are executed and amendments are current.
• Revisit your procedures to review for the Plan’s ability to continue as a going concern.

Link to the SAS 136 standard issued by the AICPA  https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/sas-136.pdf)

On Thursday, October 19th, the IRS announced new statutory limits for the upcoming 2018 year. The most important changes applicable to retirement plans are outlined below.

After holding the line for a couple of years, the IRS increased the employee elective deferral limit (the §402(g) limit) from $18,000 to $18,500, for contributions to 401(k) and 403(b) plans.  The same limit applies for most 457 plans.  The catch-up contribution limit for employees over age 50 remains unchanged at $6,000.

The §415(c)(1)(A) limit on total contributions to a defined contribution plan on behalf of an individual was increased from $54,000 to $55,000, and the §415(b)(1)(A) limitation on the annual benefit under a defined benefit pension plan increased from $215,000 to $220,000.

The dollar threshold for determining “highly compensated employee” status remains at $120,000 for the third year in a row, and the annual compensation limit under §401(a)(17) that governs the amount of compensation that may be considered in a defined contribution plan increased from $270,000 to $275,000.

Additionally, the taxable wage base for social security increased from $127,200 to $128,700.  For a full listing of changes, including those impacting IRAs, SEPs and SIMPLEs, please see the IRS’ COLA Table.

ERISA Benefit Plans of New England

6,080 ERISA benefit plans in the New England region plans obtained audits. Caron & Bletzer led the pack with 377 audited plans, and PwC was not far behind with 291 plans.

Source: http://www.auditanalytics.com/blog/leading-erisa-benefit-plan-auditors-in-california-texas-and-new-england/

It is with great pleasure that we announce the promotion of Marcia Baker, CPA to Principal effective January 1, 2017.  Since joining Caron & Bletzer, PLLC in 2006, she has focused her time on complex ERISA engagements including but not limited to employee stock ownership plan audits, 11-K filings and medical plan audits.

Marcia also oversees our internal staff development through a comprehensive training program focused on establishing a strong foundation in ERISA and audit skills so all of our staff provide the high quality service our clients have come to expect.  In her new role Marcia will continue to focus on providing high quality service to our clients and developing our team.

Last Thursday, the IRS announced new statutory limits for 2017. The most important changes applicable to retirement plans are outlined below.

The most visible limits to the public, those that affect the amount participants can contribute to a plan, remain unchanged.  The §402(g) elective deferral (employee contribution) limit and the “catch-up” contribution limit both remain at $18,000 and $6,000, respectively, for 401(k), 403(b) and most 457 plans.

The §415(c)(1)(A) limit on total contributions to a defined contribution plan on behalf of an individual was increased from $53,000 to $54,000.

The §415(b)(1)(A) limitation on the annual benefit under a defined benefit pension plan increased from $210,000 to $215,000.

The dollar threshold for determining “highly compensated employee” status remains at $120,000, and the annual compensation limit under §401(a)(17) that governs the amount of compensation that may be considered in a defined contribution plan increased from $265,000 to $270,000.

Additionally, the taxable wage base for social security increased from $118,500 to $127,200.  For a full listing of changes, including those impacting IRAs, SEPs and SIMPLEs, please see the IRS’ COLA Table.