Employee Plans News - March 20, 2012 - Follow-up on Learn, Educate, Self-Correct and Enforce Projects
Employee Plans Examinations has identified two Learn, Educate, Self-Correct and Enforce projects for future follow-up or “Enforce” action. These projects involved examining returns with self-identified:
Investments in real estate and participant loans
This LESE project involved plans with less than $5 million in assets, investments in real estate, and either participant loans or a Schedule D (DFE/Participating Plan Information). Its results showed that in the plans reviewed:
- 25% had at least one prohibited transaction.
- 25% had real estate investments that weren’t valued at fair market value.
Problems with loans included:
- not following the plan loan provisions,
- not having a bona fide loan (no loan document and/or payments),
- not having a provision for loans in the plan document, but allowing participant loans, and
- not prohibiting loans to the employer and/or related entities.
Defaulted loans or uncollectible leases
The second LESE project focused on plans that indicated they had loans or leases that were in default or uncollectible. Over 10% of the plans reviewed had prohibited transactions.
We found issues in both projects with:
- not properly valuing assets at fair market value, and
- not timely amending the plan for law changes.
Another potential LESE project follow-up focuses on Form 5500 returns filed with invalid NAICS codes (returns using a four-digit code after the codes were expanded to six digits).
Read the complete reports for these and other LESE projects on our LESE page.