Greg: This is PKF Texas, the entrepreneur’s playbook. I’m Greg Price, director of consulting solutions, and I’m here with Michael Veuleman, a director in our audit practice at PKF Texas. Michael, welcome to the playbook.
Michael: Thank you, Greg.
Greg: So, Michael, I understand that companies and administrators of employee-owned pension plans, 401k plans, they’re coming under scrutiny regarding their potential fiduciary liability.
Michael: That’s correct, Greg. As with anything built on or governed by the internal revenue code, employee and benefit plans, provisions or regulations, can be difficult to navigate. Many small mid-size companies find it difficult to ensure that all aspects of their benefit plans are in compliance with these provisions or regulations.
Greg: So, Michael, does this create some exposures for these companies?
Michael: Yes. What we generally find is that the more complex a plan design is, the more prone an employer is to having errors or operational failures, and there are many examples of operational failures.
Greg: So we’ll have to have you back to talk about some of those failure items in the future, but can maybe you amplify some of the fiduciary liability issues that we’ve talked about?
Michael: Sure. Well, a named plan administrator or a trustee or really anyone that managers or administers a plan has a stated fiduciary responsibility, and what is particularly important to know is that this responsibility extends to the individual, so if a plan violates one of his provisions or an IRS regulation, and they do not remediate it timely, fines can be assessed to the employer, and perhaps to the individual that is charged with the responsibility of overseeing the affected area.
Greg: Wow, that sounds like a complex business process. How do you verify compliance in these areas?
Michael: Well, in most cases, the plan providers have the ability to provide assistance, but unfortunately, it’s up to the employer to contact the plan provider, because they are only charged with taking the information from the employer. There are also many consultants, some of whom we work with, that specialize in reviewing plan operations to verify compliance. Many times, this is a very cost effective solution to provide some peace of mind.
Greg: Michael, this is some really great information for our audience. I think we’re going to have you back to talk some more about this. Will you join us?
Michael: That sounds great.
Greg: Okay, we’ll have you back to talk more about employee benefit plans. This has been another Thought Leader production, brought to you by PKF Texas, the entrepreneur’s playbook. Tune in next week for another chapter, and if you’d like more information about employee benefit plans and some of the exposures we’ve talked about, go to PKFTexas.com/benefitplanaudits.