Independent Review of Benefit Calculations

A proactive, independent review of benefit calculations enabled this organization to mitigate their risk exposure by ensuring compliance with government regulations and the plan document.

A large, publicly-traded client wanted to ensure that its retirement plan benefits were being administered and calculated correctly by the plan record keeper's automated system.

Findley Davies was engaged to independently validate the retirement benefit calculations with a particular focus on participants with grandfathered benefits from a merged plan. This proactive approach allowed the client to meet its fiduciary responsibility while providing an opportunity to audit the plan according to its provisions and avoid costly penalties if issues were identified during an Internal Revenue Service (IRS) or Department of Labor (DOL) audit.

Findley Davies' work began by establishing extensive testing criteria, pulling sample employee/participant data, and calculating benefits to obtain expected results pursuant to the provisions of the newly merged plan document. In establishing the testing criteria, specific transactions were identified that had the potential to be handled incorrectly following the conversion of data and alterations to the existing programming after the acquisition.

The recordkeeper provided Findley Davies with access to the selected employees/participants on its automated system through a test web site where various benefit calculations were obtained. These results were compared to Findley Davies' independent calculations performed according to plan document provisions. All calculation results were recorded and discussed with the client and recordkeeper during daily scheduled meetings.

Where incorrect calculations were identified, Findley Davies assisted the client and its outside counsel to determine appropriate corrective action. The recordkeeper was responsible for correcting the programming errors. Following the necessary corrections, Findley Davies validated a sampling of participants to ensure the specific errors were corrected and that other programming was not inadvertently corrupted.

Findley Davies assisted the client and its outside counsel in submitting a Voluntary Correction Program (VCP) filing to the IRS. The VCP filing generally includes:
•  The details of the original transaction,
•  How the error was found,
•  What steps the organization is taking to ensure incorrect calculations are avoided in the future, and
•  The proposed methodology to correct the calculation.

Findley Davies' testing criteria and process were detailed and rigorous. By filing a VCP with the IRS and submitting the appropriate fee, the client avoided the potential of having the plan disqualified, at worst; or at best, incurring penalties that would far exceed the VCP filing fee had the errors been found during an IRS or DOL audit. The client was able to move forward with confidence that future plan calculations were performed according to plan provisions.

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