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