Helping Our Clients Prevent Plan Theft

Plan theft is a perennial hot-button issue in the benefit plan arena. This is for good reason. Recent estimates show that defined contribution plans alone hold over $6.3 trillion for 106 million participants. This makes plans a target for thieves—for example thieves may steal a participant’s identity and submit a request for a distribution. When the participant discovers the missing funds (sometimes years later), they often turn to the plan sponsor looking to be made whole (such as in the highly publicized Estee Lauder case).

Recent DOL guidance noted that mitigating cybersecurity risk is a fiduciary duty and specifically notes that plan fiduciaries should understand and guard against identity theft. You can help your plan sponsor clients meet their fiduciary obligations and protect their participants.

Here are some questions you can discuss with your clients to help them evaluate their processes and combat the risk of plan theft:

· Who is in charge of approving distributions and loans? How do they ensure the person requesting the distribution or loan is the actual participant or beneficiary?

· Are all changes to employee data (such as changed address, marriage/divorce, etc.) passed along to the plan’s TPA or recordkeeper?

· How are address changes verified? Is there extra verification when a change is made close in time to a loan or distribution request?

· Are prudent processes in place to mitigate identity theft and cybersecurity incidents? What do password requirements look like? Is multifactor authentication required?

· Does the client know what steps to take if they suspect theft or another cybersecurity incident has occurred?

EJReynold’s takes cybersecurity and identity theft very seriously. Give us a call today to discuss ways we can help protect your plan’s assets and to review practical steps you can take to reduce the risk of plan theft.

Please contact us at 954.431.1774 and we will be happy to assist you.

Gift of Time: Retroactive Plan Adoption Under the SECURE Act.

The SECURE Act has extended the annual deadline by which employers may adopt retirement plans. This can be a great value-add for existing clients, as well as an enticing selling point for new clients — particularly those who are interested in establishing a plan to offset a large or unexpected tax liability.
Before the SECURE Act, an employer had to adopt a retirement plan before the end of its taxable year in order to receive a deduction for that year. With the SECURE Act, employers may now retroactively adopt a retirement plan up until their tax return due date (including extensions) for that year. That means that business owners who realize that they could use an extra deduction for 2020 can still adopt a plan now and receive a deduction for 2020 as long as they extended their company’s tax return due date. This is a fantastic opportunity for many business owners.
The extended tax return due date for most sole proprietor-ships, C corporations, and single-member LLCs is October 15, and for most partnerships, S corporations, and multi-member LLCs is September 15 (companies operating on a fiscal year basis may have different deadlines). Both defined benefit plans and profit sharing plans can be adopted retro-actively, but defined benefit plans generally need to be adopted by September 15 to comply with applicable funding rules.
Your Third-Party Administrator (TPA) partners are ready to support your discussions with business owners about these retroactive plans. Be sure to consult with them as early as possible regarding potential new plans to ensure your clients have ample time to get the necessary documentation and accounts established to maximize this opportunity.
The chart below details the practical deadlines for adopting a plan in 2021, making the plan effective for the 2020 tax filing year with an allowable deduction on the 2020 tax return.