In its June 8, 2012 edition of the Employee Plans News, the Internal Revenue Service (“IRS”) gave interesting insight into areas of non-compliance revealed in a targeted audit of defined benefit pension plans. These audit findings create a helpful checklist for defined benefit plan sponsors to review the status of plan compliance efforts. Borrowing from the list of areas of non-compliance discovered by agents in these recent audits, here is a list of topics you may want to review for your company’s defined benefit pension plan:
- Date annual funding notices and distribute timely
- Date elections to use/reduce prefunding and/or carryover balances and make the election timely
- Require actuaries to give AFTAP certifications timely
- Actuarially increase late retirement payments
- Value assets consistently for purposes of Sections 430 and 436 of the Internal Revenue Code
- Issue relative value disclosures in distribution election packets that comply with all the IRS regulatory requirements
- Define compensation for benefit accrual purposes and use that definition for actuarial valuation purposes
- Calculate benefit accrual service in accordance with plan terms
- Use correct interest rate to calculate optional payment forms
