SMALL PLANS TAKE HEED

Single participant retirement plans, those filing a Form 5500-EZ each year, are being targeted for audit. Why? It is not with the intent of looking for prohibited transactions within the plan, but rather a focus on the plan documents.

A large number of single participant retirement plans utilize an investment provider's prototype document. Because it is the responsibilty of the plan sponsor (in this case, also the participant) to maintain all records, auditors are finding that proper plan documents are not being maintained. Specifically, the necessary plan amendments that are mandated in between restatement cycles may not have been adopted. Those plan sponsors that are deemed to have incomplete documents for their plans, or those not up-to-date, could find the plans disqualified, and suddenly the tax-deferred status of their plan investments compromised.

What should you, as a Form 5500-EZ filer, do to protect yourself? Be SURE your document files are up to date. Call your document provider and ask for copies of all of the amendments you should have on file. Or contact a Third Party Administrator and ask to have your document reviewed.