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Audit Survival Tips for Retirement Plans

Although only a small fraction of retirement plans are audited each year, over time it’s almost certain that you and your plan will be audited by either the Internal Revenue Service (IRS) or the Department of Labor (DOL). Your preparation for an audit and your approach to an audit will save your organization thousands of dollars in productive time, penalties, and interest.

Audit or Investigation: A rose by any other name still has thorns

While both the DOL and IRS perform plan audits, their enforcement powers are governed by different laws and regulations, and they focus on different issues.

The DOL is responsible for the enforcement of labor laws, including the Employee Retirement Income Security Act (ERISA). The DOL has the power to exact penalties for breaches of fiduciary conduct, and if it chooses, it can sue fiduciaries for these breaches on behalf of a plan. In cases of egregious misconduct, it can initiate litigation that may put a plan’s fiduciaries in jail. The DOL’s investigation and enforcement emphasis is on fiduciary breaches and prohibited transactions. The DOL calls its enforcement program the Employee Benefit Plan Investigation Program.

The IRS is responsible for the management of our tax system through the Internal Revenue Code (the Code) and has the power to enforce infractions under the Code. When infractions are found, it can impose taxes, penalties, and interest. The IRS’s audit and enforcement emphasis is on compliance with the requirements of the Code, which rolls up under the umbrella of the plan’s tax qualification. The IRS calls its enforcement program the Employee Benefit Audit Program.

Both the DOL and the IRS select plans for audit primarily by random selection; however, there are a number of other audit triggers that sponsors should keep in mind. Answers to certain questions on the Form 5500 may trigger an audit. For example, checking the box indicating this is the plan’s final 5500 return or answering “yes” to the question, “Was there a failure to transmit to the plan any participant contributions within the time period described in the DOL regulations?” can trigger an audit. Participant or union notifications, complaints, or lawsuits also often trigger DOL investigations.

Bankruptcy filings and reports from the media can also trigger an investigation. In the spirit of interagency cooperation, the DOL may refer a case to the IRS if it discovers compliance infractions that are subject to penalties and interest under the Code.

While selection is generally random, there are certain audit initiatives that may focus on types of plans or sizes of employers, thus increasing the audit-selection odds for plans that fall within the initiative’s criteria. In 2014, 50 large employers were part of a program to determine the audit focus on future nonqualified plan audits. It is not uncommon for the IRS to issue plan sponsor questionnaires designed to help determine areas of audit focus, and—we suspect—to mark a certain number of plans for later audit. Failure to respond to an IRS questionnaire is comparable to sending the IRS an invitation to audit your plan.

Although the odds of your plan being audited are low, if the DOL or the IRS perceives some elevated risk of noncompliance, your chances of an audit will go up substantially.

It Begins with a Letter

The DOL and the IRS initiate their audit process through what they call an Information Request Letter. The Information Request Letter indicates the date the audit team plans its on-site visit to review documents and conduct interviews with individuals who have responsibilities in the administration of the plan. The letter also lists specific information that is to be made available to the auditor(s). This list often provides insight into the types of violations the auditor will be looking for during the audit.

The following list summarizes a DOL Information Request Letter that was recently sent to one of our clients regarding its pension plan. Looking at the list, it is apparent the focus is on fees and expenses.

  1. Corporate minutes
  2. Trust reports showing all receipts and disbursements
  3. Detailed documentation of fees and expenses paid from the trust
  4. Documentation regarding alternative investments
  5. Documents showing valuation of assets if assets are not readily tradable
  6. Service agreements and engagement letters
  7. Fee disclosure statements
  8. List of parties-in-interest
  9. Organization chart of the plan sponsor
  10. Trustee and investment committee minutes
  11. Plan documents, summary plan description, trust agreements, investment policy statements
  12. Summary annual reports
  13. Participant statements
  14. Evidence of fidelity bond, fiduciary liability insurance policy, if any
  15. Fiduciary training

For this client, follow-up questions focusing specifically on items 3, 6, and 7 required more detailed responses about the nature of the services provided and the fees charged. In DOL audits of defined contribution plans, we typically see a focus on fees and the timing of deposits.

Preparing for the Audit

It goes without saying, both preparation and attention to detail are essential for a positive audit experience. If you receive an Information Request Letter, don’t panic, but do recognize that you’ll need to immediately begin preparing for the audit process.

Your goal for the on-site visit is to make the auditors’ tasks as efficient as possible. Being difficult, defensive, or uncooperative is counterproductive; it wastes time, and it won’t make the auditors go away. Instead, use your time to review all of your plan documentation and begin collecting and organizing the information requested before the first auditor steps through your door. Investing ample time and energy before the on-site visit will insure that your entire team is fully prepared for dialogue, questions, and requests for further information during the on-site visit.

As part of the preparation process, we recommend that you defer or delegate projects due at the time of the scheduled audit, and you should also clear your calendar during that time in order to be available for dialogue and questions. Depending on your other responsibilities and projects, it may be wise for you to delegate the management of the audit to another team member while you retain decision-making and internal management reporting responsibilities.

It’s also essential that you notify other members of your plan administration team that your plan is entering into an audit to ensure they will be available to the auditors. Keep in mind that your plan team includes more than just fellow employees who work on the plan; it also includes your ERISA attorney, plan consultant, administrator, investment advisor, and trustee. You may want to consider having your legal counsel or consultant manage the audit for you. This is particularly useful if your provider is supporting you in most of the advisory roles of the plan.

Schedule a team meeting prior to the on-site visit to review the Information Request Letter, review plan provisions and procedures, and prepare for any questions. Having your plan documents and plan governance documentation organized, labeled, and bound makes the auditor’s job more efficient and conveys the message, “We’re ready for this audit, and we are not worried about anything.”

Finally, whether it’s the DOL or the IRS, if your schedule doesn’t permit you to be fully prepared or responsive, don’t be afraid to ask for more time before the on-site visit. The regulators recognize and appreciate it when you ask for a different schedule for good reasons. Like you, they can’t afford to waste time in an inefficient audit.

The Audit

Auditors are looking for specific information, so provide only what is requested. Ideally, your plan is in good condition, but if it isn’t, providing more information than is requested is like giving a hangman extra rope. During the audit, proactively address any issues of concern raised by the auditor, be available and responsive, and be patient with the process. In addition to the on-site visit, the audit team may take certain documents for further review.


The DOL focuses its examinations on prohibited transactions. The most common forms of “technical prohibited transactions” are late deposits of deferrals, problems with loans to participants, and improper processing of qualified domestic relations orders (QDROs). And as we saw in the Information Request Letter above, fees are of particular interest to the DOL. With most fees now paid by plan participants, the DOL focuses on enforcement of the fundamental fiduciary conduct that:

  • The fiduciary is acting at all times in the best interests of plan participants,
  • That fees paid by the plan (and its plan participants) are reasonable, and
  • Fiduciaries are diligent to avoid conflicts of interest in their hiring of advisors and service providers to the plan.


While the DOL focuses on participants and fiduciary roles and responsibilities, there is clearly a shared focus with the IRS on compliance (i.e., compliance with the plan document, compliance with regulations, etc.). Obviously, tax-related issues, such as current deductions or delaying the recognition of income, are in the IRS’s jurisdiction. So is compliance with the regulations that pertain to plan qualification, including nondiscrimination testing and all limits.

The IRS also looks at compliance with the plan document, which includes consistency among all your plan documents and plan operation, compliance with constantly changing regulations, and administration of plan eligibility. More recently, the IRS has become concerned with improper investment valuations in cases where an asset is illiquid or is not readily valued, which can cause an undervalued or overvalued benefit distribution.

The IRS will request information on your nondiscrimination and limits testing, including the primary data. You can expect your recordkeeper to provide the reporting of this testing and the primary data for their review.

The following is a list of the 12 most common issues the IRS finds in its audits of retirement plans:

  • Plan document not up-to-date
  • Plan operation doesn’t follow the plan document
  • Plan definition of compensation not followed
  • Matching contributions not made to all eligible employees
  • ADP/ACP test performed improperly
  • Eligible employees not allowed to defer
  • Deferral limits exceeded
  • Deferral deposit delay
  • Participant loans don’t follow plan documents, procedures and/or law
  • Hardship distributions improperly administered
  • Top-heavy requirements ignored
  • Failure to file Form 5500 timely

The process for both agencies becomes more complex if enforcement issues are found.

After the Audit

Most auditors we meet are assigned to multiple cases, so while you should be prepared to hurry up for them, you must also be prepared to patiently wait for their responses to you. Once the audit is completed, the auditor will follow-up with a phone call to verbally convey the audit findings; this phone call is followed by a written audit findings letter.


In the best case, the result of a DOL investigation is a “no action” letter. The plan has passed the DOL’s testing, and no further action is being pursued by the DOL. The letter may include disclaimer language that says there may be ERISA violations in certain areas, but no such activity was found during the investigation.

The more common letter these days is a Voluntary Compliance Letter, which documents that certain infractions were found (most commonly late deferrals or issues relating to the loan program), and certain corrective action under the Voluntary Fiduciary Compliance Program (VCP) is required. When egregious compliance errors are found, the DOL can sue for civil penalties on behalf of plan participants and initiate litigation against fiduciaries for breach of fiduciary responsibilities.


For an IRS audit, the best case is an audit findings letter showing that no further actions are necessary and that the audit file has been closed. If errors are found, then certain corrective action may be necessary through the IRS’s Audit Closing Agreement Program. Here, the general principle is to make the plan and its participants whole. This often includes a corrective contribution plus interest to plan participant accounts, excise taxes required by Code Section 4975, and other fees and penalties payable to the IRS.

If you and your legal counsel disagree with the audit conclusions in some way, there is an appeals program that enables another review of the audit findings and your position.

Fortunately for plan sponsors, the voluntary corrections and audit corrections programs have made plan disqualification extremely rare.

Staying prepared: a different kind of “selfie”

Because plan administration is so complex, it’s common for plan sponsors to have some correction issues at some point in the life of the plan. Many of the errors that occur and corrections that need to be made arise out of a triggering event, such as payroll staff turnover, system changes, one-off processing events, annual limits, or business reorganizations.

If you’ve had a potential error-inducing event, it may be time to conduct a self-audit to ensure that your plan’s operation is consistent with plan documents and all laws. Performing regular self-audits will give you greater protection against an IRS or DOL audit.

As a plan sponsor, there are three things you can do to make your plan audit-ready, should that letter arrive from the DOL or the IRS: organize, review, and retain. We’ve provided a list of action steps below. You’ll notice that organize and retain steps are simple and really only involve good record-keeping practices, while some of the steps in the review phase may involve engaging an advisor to ensure the correct result.


  • Current records
  • Records eligible for summarization and archiving


  • Updated roster of key plan officials, including external advisors
  • Investment policy statement, loan procedures, QDRO procedures documents
  • Determination letter and upcoming determination letter cycles
  • Service agreement for necessary changes to reflect actual operation of plan, changes in law or regulation
  • Documentation of internal controls and update as needed
  • Fees and fee changes, fee disclosures, and documentation
  • Plan and data transmission requirements with payroll staff
  • Plan document and summary plan descriptions against plan operation
  • Fidelity bond coverage
  • IRS 401(k) Fix-It Guide and make self-corrections as necessary
  • Plan operation relative to terms of plan
  • All documentation related to corrections under SCP or VCP


  • Signed plan documents, trust agreements, plan amendments, and board resolutions
  • Summary of materials modifications, summary annual reports, and other required participant notices and document their dates of distribution
  • Investment process documentation and decisions, committee minutes
  • Compliance testing, participant allocation, and other plan operation reports
  • Current Form 5500, schedules, and audit report
  • All documentation related to corrections under SCP or VCP

As you can see, this process is similar to the year-end close of a corporation’s financial statements and tax return filings, and it’s an opportunity for you to review, update, and finalize your records for the year. You should adopt this practice as part of your year-end close or annual review and planning process.

Correcting Errors

If you find a problem during the self-audit of plan operations or in your review of plan documentation, there are ways to voluntarily correct these problems. Depending upon the nature of the issue, you may be able to self-correct your plan, document the corrections for the file, and move forward without a formal filing with the IRS or the DOL. More significant issues, such as failing to amend the plan timely or failing a nondiscrimination test and discovering the problem in a later plan year, generally require filing for and obtaining approval of the self-correction methodology.

The more common the problem, the more likely it is that other plan sponsors have experienced the same thing. The IRS and the DOL continually publish new procedures for automatic corrections and guidance on how to perform formal corrections, so it’s likely that an issue you’ve uncovered can be corrected efficiently through a self-correction program before being discovered during an audit.

In Perspective

While getting that letter from the IRS or the DOL is never pleasant, if you do receive one of those much-dread letters, there are things plan sponsors can do to prepare. Reviewing the Information Request Letter, collecting the required information, being thoroughly familiar with your plan’s operation, and of course, fully cooperating with your auditors will go a long way in getting you through the audit.

And while the chances of being audited are relatively low, the most successful approach is to assume that you will be audited and prepare accordingly by performing an annual self-audit. Adding a self-audit to your annual compliance calendar will save you time and your organization dollars. And if that’s not enough motivation, consider these words of wisdom from Dave Barry: “We’ll try to cooperate fully with the IRS, because, as citizens, we feel a strong patriotic duty not to go to jail.”

For more information contact Tom Swain at 615.665.5319 or Tom.Swain@findley.com or the Findley consultant with whom you normally work.

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Do you need a pay strategy?

Have you ever wandered through dense, unfamiliar woods? You weave around trees, hop over streams, and climb over other obstacles until you no longer know where you are or how you got there. Confused, maybe even a bit afraid, your palms sweat, your heart pounds, and you wonder, “Which way do I go?”

At this point, you may be thinking that a compass would be a valuable tool to have. While a compass won’t provide a clear path out of the woods (you will have to use your judgement, and you may not be able to travel in a straight line), it will point you in the direction you need to go.

Talent compass and pay strategy go hand in hand

Being an employer sometimes feels like being lost in the woods. There are so many unknown paths to navigate and obstacles to avoid. Two of the biggest obstacles, finding and keeping talent, are becoming increasingly tough challenges to manage.

So wouldn’t it be nice to have a “talent” compass? Just a simple tool that could help employers in their struggle to attract and retain talent in a competitive job market?

Good news, there is a tool any employer can use: it’s called a pay strategy.

A well thought out pay strategy is designed to attract and retain key talent. For most employers, this means having an understanding of what other organizations are paying and defining ranges of compensation by position so that managers can make informed business decisions on pay.

If you are like many employers, you want to pay all of your employees at or above market pay levels, but you simply can’t afford it.

There are two ways you can combat this situation:

  1. You can reduce headcount by laying off your less productive employees, thus allowing you to allocate some of their pay to others and hope your remaining employees are satisfied. (Caution: there are many factors to consider prior to using this option.)
  2. You can develop a pay strategy (your compass) using market pay data to make business decisions when administering pay.

The second option, developing an effective pay strategy, provides a forum for management to think about how the organization will retain its best talent and recruit other great talent. In short, your pay strategy will point your organization in the direction it needs to move. Keep in mind, however, that like the path through the woods, even the best pay strategy may need to be change course as needs (and markets) change. Significant market adjustments occur most often when positions are in high demand. A high demand position may be the result of fewer qualified candidates or changes to the business environment.

How should an organization administer its pay using a market based pay approach when the budget doesn’t allow it to pay at “a competitive level?”

It’s not easy, as there are many factors to consider. To stay on track, start with a written document that centers on your best strategy for managing pay issues and addresses the following decision points:

  • Will you provide a general cost of living adjustment, and if so, how will that amount be determined?
  • How will you differentiate pay for top performers compared to others? How are you going to determine your top performers?
  • How will promotional adjustments be authorized? Will managers have free reign to provide promotions to employees, or will there be a system of checks and balances? What will be expected from an employee before he or she can be promoted?
  • How will you budget for the different adjustments in order to provide the most value?
  • How often will you perform a market study on your employees? How will the results be put into action?

Once you’ve documented your strategy, you can define your pay administration guidelines. These guidelines will help your organization manage its pay plans within its strategy. Effective administration is essential for your organization to execute its strategy to its full advantage.

Creating an effective compensation strategy with pay administration guidelines is a useful tool for any organization navigating the competitive landscape for talent. Yes, you may occasionally need to stray from the data to retain or attract certain individuals, but the important thing is that your organization’s compass keeps you moving toward your strategic pay goals.

Questions? Contact the Findley consultant you normally work with, or contact Brad Smith at brad.smith@findley.com, 419.327.4414.

Published on May 8, 2019

© 2019 Findley. All Rights Reserved.

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Using Compensation Management as a Tool to Recruit and Retain Top Talent

The U.S. had experienced a dramatic power shift in the workplace. It was a long, slow recovery, but the job market has turned a corner, presenting job seekers with multiple employment options. The month of February saw 7.1 million job openings across a range of industries, and the U.S. unemployment rate is 4.5% according to the U.S. Department of Labor Bureau of Labor Statistics. It’s clear that employees are taking advantage of their options.

A strong job market is great news for employees and job seekers, but it isn’t so good for employers that must compete for new talent as they struggle to retain top performers. In a PayScale 2019 Compensation Best Practices study, 66 percent of all organizations agree or strongly agree that retention is a growing concern (up from 59 percent last year).

In today’s economy, employers that fail to attract and retain talent will ultimately lose, and employers with poor retention rates will find themselves spending more time and money recruiting and training new employees than focusing on growing their business. Finding a solution (or solutions) is critical to long-term success.

Successful companies know that one way to compete for talent is to become a preferred employer, where employees are so engaged in their jobs that they aren’t interested in pursuing other opportunities. An essential element in achieving preferred employer status is a well-thought out compensation strategy. This is crucial, as compensation is one of the top three drivers of attrition.

A compensation strategy is a compass to guide disciplined pay design, administration, and governance. It will also:

  • Provide a philosophical framework for the development and management of compensation systems and policies,
  • Provide key messages to communicate with employees, and
  • Recruit top talent to meet growth and profit objectives.

When it comes to what type of compensation strategy to implement, a best practice to consider is a pay for performance philosophy. Pay for performance plans base employee pay on productivity, as opposed to hours spent on the job or at a set salary. While this can result in employees feeling less financial security, there are several advantages for both the employee and employer. If done correctly, a pay for performance structure will:

  • Promote teamwork and avoid promoting behaviors that benefit individuals to the detriment of the company or other employees,
  • Deliver compensation under a disciplined and objective structure that rewards employees,
  • Link pay levels to the performance of the individuals and the organization,
  • Use survey data and technology to analyze and understand the changing dynamics of pay for specific jobs, and
  • Design executive compensation plans that motivate and retain top talent and drive performance that creates shareholder value.

A culture without a pay for performance philosophy does not reward high performance and sets the company up for high turnover. A company that continues to reward low, average, and high performers with the same salary increase or bonus ultimately encourages high performers to look elsewhere. There is simply too much competition for talent to avoid properly rewarding high performers.

Questions? Please contact the Findley consultant you normally work with, or contact Jennifer Givens at jen.givens@findley.com, 216.875.1944.

Published on May 6, 2019

© 2019 Findley. All Rights Reserved.

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Employer Sponsors of Health Benefits Part 2: More Gridlock Ahead

Regardless of what side of the political spectrum you find yourself, you would probably agree that to say Washington, DC is in gridlock is an understatement. We are not going to assign blame to any particular party for the impasse. Instead, we’ll focus on how employer-sponsored health benefits could be impacted in 2019-2020 and by the results of the next Presidential election in November 2020.

.We will look at how the Trump Administration’s executive actions between now and then could shape the direction of employer-sponsored health benefits. We will also speak to how the makeup of the U.S. Supreme Court (SCOTUS) could impact the outcome of any related legal challenges.

On February 27, Representatives Pramila Jayapal (D-WA) and Debbie Dingell (D-MI) introduced the Medicare for All Act of 2019. This bill goes far beyond the Affordable Care Act (ACA) by eliminating employer-sponsored health plans. In fact, Healthcare.gov (i.e. the ACA Marketplace or Exchange) would also be eliminated as everyone is moved to Medicare within two years. Given the Democrats have a 235-197 majority in the House of Representatives (there are 3 vacancies), it’s quite possible the Medicare for All bill will pass. However, the Republican majority in the U.S. Senate (53-47) likely means this bill would not pass the Senate—if it ever makes it to the floor for a vote. Other health care-related bills passed by the Democrat-controlled House will likely be opposed by the Trump Administration and the Senate Republicans too.

The Trump Administration will continue issuing healthcare-related Executive Orders (EO), such as the one which changed the maximum coverage period for short-term limited duration insurance plans from 12 to 36 months. Another example is the EO that would allow organizations (beyond churches and religious employers) to avoid the ACA’s contraceptive mandate based on religious or moral grounds. Predictably, this EO was challenged by Attorneys General from five states where the governor is a Democrat and/or the legislatures are primarily controlled by Democrats. As a result, two federal district courts have issued nationwide preliminary injunctions to block this order.

The Trump Administration is also likely to continue directing the DOL/HHS/Treasury Departments to issue regulations or guidance that are consistent with its objectives and policies to control healthcare costs and improve access to affordable coverage. One example is the proposed rules to expand the use of Health Reimbursement Arrangements (HRAs) by employers of any size to pay for individual health insurance premiums. Another example is the possibility the HHS Secretary could relax prescription drug importation rules to give Americans the ability to purchase their prescriptions from abroad at a fraction of US prices.

Although Democrats would probably not oppose prescription drug importation because it will help reduce costs for their constituents, they are likely to challenge the HRA measure. Democrats are concerned about their constituents losing comprehensive, ACA-compliant coverage through their employers (at least until they can get them moved on to Medicare) in exchange for a stipend that may not be sufficient to cover the premiums for an individual health insurance policy (probably with higher deductibles and a more narrow provider network). And speaking of challenges, you may recall that Attorneys General from eleven states and the District of Columbia filed suit to block the Administration’s endorsed DOL/HHS/Treasury regulations on Association Health Plans (AHPs), because they believe AHPs will undermine the ACA Marketplace and result in people being covered under non-ACA compliant plans.

Earlier, we mentioned the makeup of SCOTUS will determine the fate of court challenges to the Trump Administration’s (and that of future Administrations) healthcare-related EOs and regulations. Today, the Administration enjoys an advantage with the recent appointments of Justices Gorsuch and Kavanaugh. However, with Chief Justice Roberts showing a tendency to be a more moderate voice, that advantage is narrow. What if President Trump has the opportunity to appoint another conservative Justice before the November 2020 election and that nomination is approved by the Republican majority in the Senate? If that happens, it’s more likely the Administration’s EOs and regulations will be upheld in the future.

Learn more on possible 2020 election scenarios by reading the third article in this series: Employer Sponsors of Health Benefits: Part 3: Possible 2020 Election Scenarios.

Questions? Contact the Findley consultant you normally work with, or Bruce Davis at 419.327.4133, Bruce.Davis@findley.com.

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Posted March 7, 2019

Employer Sponsors of Health Benefits Part 1: Possibilities to Sustain Healthcare Costs


It’s little comfort to an employer sponsoring employee health benefits to be told annual healthcare trend rates are moderating. Even at a 4 – 5% trend, healthcare costs continue to grow faster than wages and salaries. Although employers have passed some of this increase on to their employees via higher contributions and out-of-pocket expenses, a tight labor market makes this more difficult to do. With the Affordable Care Act (ACA) Employer Responsibility requirements still in place, and the average employer’s share of healthcare costs now more than half the cost of an entry-level employee, some employers will continue to scrutinize work schedules to avoid full-time employee thresholds.

Employers know healthcare will be at the crux of the 2020 Presidential election. With uncertainty as a foundation, employers:

  • Are now hearing about proposals to eliminate employer-sponsored health plans in favor of a “Medicare for All” program.
  • Want to know if the “Medicare for All” proposal is economically feasible; would it, indeed, “level the playing field” in terms of attracting talent.
  • Question if the increase in their taxes needed to support this program would be more or less than what they spend now on healthcare benefits.

Between now and the 2020 election, employers are striving to sustain competitive, affordable health benefits. They have tried and exhausted many tactics to contain healthcare costs, and are looking for other alternatives—beyond putting their health plan out to bid to optimize network discounts and/or reduce fixed costs, such as Administrative Services Only (ASO) fees and stop loss premiums. The following diagram shows a range of possibilities an employer can consider for 1/1/2020. It presupposes the employer has:

  • Completed a claims analysis to identify cost trends and drivers.
  • Examined demographics for health status and special needs to address well-being.
  • Considered proposed regulations liberalizing the use of Health Reimbursement Arrangements (HRAs), by employers of any size, to pay individual health insurance premiums are finalized for 2020.

This diagram does not speak to interactive modeling tools, like Findley’s BenScan® modeler, to value the impact of these potential changes on their gross and net costs.

Possibilities to Sustain Healthcare Costs

However, many employer concerns involve questions about future legislative, regulatory, and litigation activity that could affect employee health benefits. As a result, we have developed a three-part series to delve into the current situation in Washington, DC and the results of the 2020 election and how it may impact the future direction of employer-sponsored health benefits.

Your thoughts are appreciated too. Share your input here or voice your opinion on what the future hold for employer-sponsored health benefits.

Read more about the current situation in Washington, DC in our next article in this series: Employer-Sponsors of Health Benefits: Part 2: More Gridlock Ahead.

Questions? Contact the Findley consultant you normally work with, or Bruce Davis at 419.327.4133, Bruce.Davis@findley.com.

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Posted March 4, 2019

Findley Adds TAMS Group Human Capital Team


We are excited to announce that we have deepened our human capital resources with the addition of Independence, Ohio-based TAMS Group’s human capital team, effective February 15th, 2019. The additional resources will become a part of Findley’s Cleveland, Ohio office.

This strategic transaction:

  • Deepens our expertise and talent in the area of compensation and rewards, HR performance optimization, leadership and team development
  • Adds a new service: retained search talent acquisition for specific positions
  • Broadens our client base in several states

Read our Press Release

Employee Retention: 5 Tactics to Developing an Effective Strategy

Economic Principles…Makes Sense

The law of supply and demand – you’re probably familiar with this economic principle. When one goes up the other goes down. As a geographic market experiences rapid population and economic growth, you might think an increase in job seekers will result in a decrease in the market value of jobs. If there are more people vying for a position, the less you have to pay in salary to fill the position. However, any good HR consultant will tell you this principle isn’t the only one you should consider in developing your compensation policies. Turnover is another factor which drives a job’s market value. As more companies move into a geographic region, the talent pool will begin to shrink. You will have to pay more to attract a new hire. Retaining your top talent will keep you competitive in your industry and save you time and expense training in the long run.

Strategy Over Theory

Employers, looking to retain key employees, should develop a retention strategy. While most employers will state that they want to retain all of their employees, a well-designed retention strategy is likely going to require additional revenue to be invested in employees and is unlikely to require implementation across the entire organization. Employers need to evaluate their business and determine key positions in which they want to avoid turnover and identify talented employees whom they want to ensure they retain.

A retention strategy may improve the value proposition delivered to all employees. When budget constraints exist, your retention strategy should be designed with key employees and positions in mind. Consider these five tactics as you develop your organization’s employee retention strategy:

  1. Ensure that your managers actually know how to manage. Poor managers and pay issues are the two leading causes of employee turnover. Quality managers should be accountable, effective, honest, focused, emotionally intelligent, and motivated.

Tip: Consider if managers would benefit from training and development.

  1. Create a pay for performance culture. Key employees are often the best performers. Top performers become discouraged when they receive the same rewards as everyone else. Adopting a pay for performance system communicates that performance does matter. It allows leadership to allocate more financial resources to employees who are top performers. Keep in mind, organizations must be willing to deal with poor performers in order to take care of top performers.
  1. Verify that your total rewards package is competitive. Use external market data to identify if your total rewards are competitive. Ensure your total rewards strategy is well-designed, executed effectively, and communicated properly.

Tip: Consider putting in place long-term incentive pay strategies that promote top level employee retention.

  1. Foster employee engagement. Engaged employees are more content in their roles, perform better, and feel valued. Engaged employees respond to feedback and desire appreciation. They’re engaged and expect honesty.
  1. Communicate with employees (repeatedly) the organization’s values If the organization provides a workplace experience and total rewards package that are the envy of competitors, take the time to communicate that to employees. Employees don’t know what they don’t know. Take credit for the opportunities your organization provides to employees. It’s easy to communicate good news.

Tip: Annual Total Rewards Statements will effectively communicate your organization’s benefits providing employees with greater awareness, understanding, and appreciation for their total compensation.

In Perspective

Knowing that turnover is a substantial cost for an organization, employers have an opportunity to embrace a proactive approach to employee retention. An effective employee retention strategy just might reduce the costs or turnover and improve employee morale across the board.

Questions? Contact the Findley consultant you normally work with or Brad Smith at Brad.Smith@findley.com, 419.327.4414.

Posted February 6, 2019

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Expanding Workplace Wellness Initiatives into Our Communities

Our Country’s Current State

According to a 2017 Gallup World Poll, the United States ranks 17th in life satisfaction scores.[1] For the first time ever, Americans’ life expectancies are on the decline. The US ranks number one in obesity and chronic conditions caused by obesity worldwide[2]. It’s evident that our country has room for improvement when it comes to health and well-being.

Where to Begin?

Make Well-being a Priority

Here’s the good news: about 75% of employers are doing something by offering wellness programs and benefits to support their employees in taking steps toward a healthier lifestyle.

However, a broader approach will be required to begin and sustain long-term behavior change that can improve health and well-being nationwide. To create a true Culture of Health, individuals, employers, and institutions must work together. With collaboration, we can increase access to the resources individuals need and provide opportunities to make healthier choices. In a Culture of Health, communities flourish and individuals thrive.

Community Culture of Health:
A Success Story

Organizations ready to make a bigger difference can look for ways to expand wellness beyond the workplace. Here’s one success story: A rural school system built a grant-funded gymnasium with state of the art fitness equipment. Recognizing the lack of access to fitness facilities for residents, as well as the need for levy support, the school opened the gym to the public during evening and weekend hours. The results were clear. This one investment brought significant community engagement, improved individual health, and led to the passing of the school levy.

Follow These Best Practices

Are you ready to consider ways to expand your organization’s wellness efforts into the community? Start with the best practices established by the Robert Wood Johnson Foundation[3] :

  1. Create a shared vision
  2. Establish community buy-in
  3. Evaluate access and feasibility
  4. Implement, assess, and refine

[1] “State of the States.” Gallup. 2019. Accessed January 30, 2019 https://news.gallup.com/poll/125066/State-States.aspx?g_source=link_NEWSV9&g_medium=TOPIC&g_campaign=item_&g_content=State%2520of%2520the%2520States

[2] “Obesity Update 2017.” OECD. 2017. Accessed January 30, 2019. https://www.oecd.org/els/health-systems/Obesity-Update-2017.pdf

[3] “Healthy Communities.” Robert Wood Johnson Foundation. 2018. Access January 30, 2019. https://www.rwjf.org/en/our-focus-areas/focus-areas/healthy-communities.html

Posted February 1, 2019

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Two of a Kind? Not All 457(b) Plans Are the Same

You may already know there are significant differences between a 457(b) plan sponsored by a governmental entity and a 457(b) plan sponsored by a tax-exempt organization. But do you know what they are? It can be confusing for plan sponsors because the plans are so similar and articles on the subject of 457(b) plans do not always point out the distinctions.

How All 457(b) Plans Are Alike

A 457(b) plan is a deferred compensation plan that permits certain employers or employees to contribute money for retirement on a tax-deferred basis. Internal Revenue Code (Code) Section 402(g) provides the contribution limit (402(g) Limit) which for 2019 is $19,000. Earnings on these contributions are also tax-deferred. A 457(b) plan is not subject to coverage or nondiscrimination testing.

If you are familiar with 401(k) plans, you’ll recognize many of the other common requirements or provisions described below that apply to both tax-exempt and governmental 457(b) plans.

  • Documentation: the plan must be in writing.
  • Catch-up contributions: a participant may be permitted to elect to increase salary reductions for the final three years before reaching normal retirement age up to the lesser of
    1. two times the applicable dollar limit ($38,000 for 2019), or
    2. the applicable dollar limit plus the sum of unused deferrals in prior years provided the prior deferrals were less than the applicable deferral limits (not counting any age 50 catch-up contributions (permitted only in governmental plans)).
  • Deferral election timing: the election to make contributions through salary reduction must be made before the first day of the month in which the compensation is paid or available.
  • 402(g) Limit: employer and employee contributions in the aggregate are measured against the 402(g) Limit.
  • Hardship distributions: these are permitted if the distribution is required as the result of an unforeseeable emergency beyond the participant’s or beneficiary’s control, all other sources of financing have been exhausted and the amount distributed is necessary to satisfy the need (and the tax liability arising from the distribution).
  • Required minimum distributions: Code Section 401(a)(9) rules apply.
  • Distributable events: these include attainment of age 70½, severance from employment, hardships, plan termination, qualified domestic relations orders, and small account distributions (with a minor difference).

How Governmental and Tax-Exempt 457(b) Plans Differ

The differences between a tax-exempt 457(b) plan and a governmental 457(b) plan include:

  • Eligible employees: governmental plans can include any employee or independent contractor who performs services for the employer while tax-exempt plans can only make select management or highly compensated employees eligible.
  • Automatic enrollment: governmental plans may provide for automatic enrollment while tax-exempt plans may not.
  • Roth contributions: governmental plans may provide for the designation of Roth contributions for all or a portion of salary reductions while tax-exempt plans may not permit Roth contributions.
  • Catch-up contributions: governmental plans may permit age 50 catch-up contributions ($6,000 in 2019) while tax-exempt plans may not.
  • Correction of excess deferrals: governmental plans must distribute any excess contribution (plus income) as soon as practicable after the plan determines that an amount is in excess while tax-exempt plans must distribute the excess by April 15 following the close of the taxable year in which the excess deferral was made.
  • Loans: governmental plans may permit loans while tax-exempt plans may not.
  • Contributions to a trust: governmental plans are permitted to contribute to a trust while tax-exempt plans are not.
  • Rollovers: governmental plans may provide for rollovers to other eligible retirement plans (401(k), 403(b), governmental 457(b), and IRAs) while tax-exempt plans may not.
  • Taxation: for governmental plans, taxation is at the time of distribution, while for tax-exempt plans, taxation is at the earlier of when amounts are made available or distributed.
  • Statutory period for correction of plan failures: governmental plans have until the first day of the plan year beginning more than 180 days after notice from the Internal Revenue Service regarding failure to meet applicable requirements while such correction period is not available to tax-exempt plans.
  • Correction programs: a governmental plan can apply for a closing agreement with a proposal to correct failures that will be evaluated under EPCRS standards while such corrections are generally not available to tax-exempt plans.

If you sponsor a 457(b) plan, you may want to review your plan design to make sure it provides the available optional features you want for your employees. In addition, you’ll want to make sure that the plan is compliant as written and in operation.

Questions? Please contact the Findley consultant you regularly work with or Sheila Ninneman at Sheila.Ninneman@findley.com, 216.875.1927.

Posted January 15, 2019

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