Are you prepared for an IRS or DOL audit?.

Agenda 2014 IRS/DOL audit activity Areas of audit focus Received an audit letter? Now what? Working with an auditor: Say this, Not that! Sponsor activities that trigger an audit Pre-audit strategies to minimize risk of penalties 2

Areas of DOL audit focus Fiduciary governance Prudent selection and monitoring of investments, fees, and service providers Prudent processes for administering the plan Reporting and disclosure 5500 filings Participant notices 3

Areas of DOL audit focus Fiduciary standards that all Plan Sponsors must meet Exclusive benefit rule Prudent expert rule Diversification rule Plan Document rule 4

Areas of DOL audit focus DOL National Enforcement Projects and Priorities Employee contributions project Fiduciary service provider compensation project Employee Stock Ownership Plans project 5

2014 DOL audit activities 2014 DOL enforcement results*: Civil investigations closed: 3,924 % closed with monetary results: 65% Total monetary recoveries:$600 Criminal investigations closed: 385 Guilty pleas or convictions: 85 Indictments of individuals: 106 *DOL 2014 Fact Sheet: 6

Areas of DOL audit focus DOL audit areas Prohibited transactions –Delinquent contributions of employee deferrals, self-dealing, party in interest transactions Prudent investment process –Investment selection and monitoring, appropriateness of fees Service provider selection and monitoring –Evaluation process, Reasonableness of plan fees under 408(b)(2) Disclosure status –Form 5500 filing, Fee disclosure notice, Compliance with all participant notice requirements –SPDs, SMMs, Benefit Statements, 404a-5 Fee Disclosure 7

Areas of IRS audit focus Participation Nondiscrimination Plan Documents Maintenance, compliance with plan documents Compliance with tax code requirements Internal controls 8

Areas of IRS audit focus Compliance with plan provisions Definition of compensation Eligibility, Vesting Distributions and Loans Pension limits Testing status, Compliance with requirements and results Coverage, Nondiscrimination and ADP/ACP Completeness of Plan Document and Amendments Documents timely updated and signed 9

Received an audit letter? Now what? Don’t panic! –Phone call or official letter from DOL/IRS? Retain an ERISA professional to represent you Anticipate the Audit’s focus Respond by the required response date –Or ask for reasonable extension Provide exactly and only the requested information 10

Working with an auditor Say this, not that! Should you hire a professional to assist you? –TPAs, Attorneys Provide only what is requested Be friendly! Your auditor is a person too! Organize your materials carefully Provide accurate and complete materials Prepare for their visit: discuss with your TPA or attorney any issues of concern prior to the auditor’s visit 11

Why me? What triggers an audit? Late or incomplete 5500 filing –Errors, missing information, incomplete or incorrect auditor’s report Participant complaints Media coverage of Plan Sponsor Random audits 12

Pre-audit strategies to minimize penalty risk Process is key Documentation, Documentation, Documentation! Fiduciary training program for relevant employees Fiduciary Liability Insurance Retain a retirement specialist to assist you: –3(21) or 3(38) Investment professionals –Third-Party administrators –ERISA attorneys 13

Important information 14 This document is provided with permission from John Hancock Retirement Plan Services, LLC. It is for informational purposes only, and while every effort is made to ensure the accuracy of its contents, it should not be relied upon as being tax, legal or financial advice. S-IPS29299-GE 1/ S-PXXXXXGE xx/2015-XXXXX