As you are probably aware over one-third of ERISA audits are inadequate. Prohibited Transactions, Hidden Fees & Conflicts of Interest in Employee Retirement Plans. Learn how to quickly find Prohibited Transactions and verify income.

1. Employee Benefits Security Administration29 CFR Part 2550 §408(b)(2)Prohibited Transactions, Hidden Fees & Conflicts of Interest in Employee Retirement PlansNY CPE ProgramMarch 15, 2011Charles Massimo, President, CJM Fiscal ManagementJames HollandRick Canipe, EA, CFP, QKATreasury License 77840IRS CAF 03-0123051R Content Courtesy of James Holland Rick Canipe, EA, CFP, QKA

2. Why Be Here? What shall we review? EBAs ERISA Budget Accounts are missing and they’ll pay your audit fees Investment Friction lawsuits Fiduciaries breached duty of prudence by investing in retail share classes* Prohibited Transactions They’re in >80% of YOUR plans

3. Learn how to quickly find Prohibited Transactions and verify income

5. Members bear primary responsibility of documenting compliance with CPE requirements. For each program the member should be able to document the following:

6. Sponsor

7. Title and description of content

8. Date(s)

9. Location

11. SAS 104-111 Calls for thorough documentation of the audit. The Plan Sponsor can face financial penalties if the audit is deemed deficient because the documentation was incomplete.

12. Your Challenges “The Labor Department has also uncovered misunderstandings on how to audit investments. Audit procedures on parties in interest and prohibited transactions are also an area the Labor Department feels is not properly audited. Auditors need to perform procedures to address prohibited transactions with parties-in-interest.” —Diane Wasser, Officer in Charge — Pension Services Group, Amper, Politziner & Mattia P.C., The Metropolitan Corporate Counsel (July 2007)

14. Lack of understanding as to what are prohibited transactions

15. Parties-in-interest, not N/ASponsor is a party-in interest/meets exception

16. Example Control Deficiency # 6 Improper valuation of investments, especially alternative investments

18. 64 perform more than 100 audits that cover 25,000 plans

19. 8,000 perform 5 or fewer audits

21. [ERISA §405(d)(1)]

23. Landscape Why All the Lawsuits and Legislative Efforts?

24. 1% expense ratio and 1% trading costs me 50% of my wealth!

25. The 3 Waves of Lawsuits Investment Managers Plan Sponsors (including C-Suite) Fiduciary Breaches 8-figure Settlements Do not underestimate LaRue Service Providers

26. Lawsuits Against Plan Sponsors A search of 401(k) lawsuits highlights three (intertwined) areas of concern: Excessive Fees Employees Arguing Financial Harm Fiduciary Breaches / Negligence

28. the first tax on a prohibited transaction is 15% of the sum involved.

29. You can avoid paying the compulsory tax(100% of the sum involved) if the transaction is corrected before the next taxable period.http://www.job-employment-guide.com/401k-prohibited-transactions.html

30. Prudent Expert Manual Arming CEOs, CFOs, HR Directors

31. Retail vs. Institutional Wal-Mart 401(k) Pays Retail - Forbes.com Jan 18, 2010 ... "Merrill Lynch, with Wal-Mart's blessing, was choosing mutual funds based... Because the case involves the giant retailer and controversial ...www.forbes.com/forbes/.../investing-walmart-retirement-401k-paying-retail.html