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Posted on: September 19th, 2017

The Equifax Hack: How to Protect Your Data

The Equifax Hack: How to Protect Your DataEquifax recently announced that its systems were breached this summer by an unauthorized third party, which gained access to personal information including full names, Social Security numbers, birth dates and addresses.

The breach, which Equifax discovered in late July, has the potential to impact approximately 143 million consumers. With nearly one in three American’s personal data potentially exposed, consumers are left wondering what they can do to protect themselves or their companies.

Determine Equifax exposure

Equifax says it will be contacting all consumers whose personal information was breached. In the meantime, the credit reporting bureau has set up a dedicated website to provide information and help consumers find out if they’ve been impacted. Visit and click the “Potential Impact” tab or call the Equifax hotline at 866.447.7559.

ID theft protection from Equifax

Whether or not they are directly affected, Equifax is offering one year of free identity theft protection and credit monitoring to all U.S. consumers. To get the free year of TrustedID Premier Credit Monitoring, visit and click the “Enroll” tab. Please note that after the one-year period expires, standard charges will apply.

Credit monitoring best practices

The significant impact of this and other recent hacks is an important reminder to all consumers, businesses and organizations to remain vigilant about identity theft. Below is an overview of steps to take now and into the future to monitor the security of personal and financial data.

Use two-step authentication

Most companies and financial institutions offer two-step authentication. This adds a second layer of protection to account log-ins, by requiring an additional credential beyond username and password. Examples include a bank sending a one-time passcode via text or email to access accounts, or a ZIP code required to confirm a credit card payment. Consumers should explore all online accounts and enable two-step authentication when available.

Regularly review credit report

Consumers have the right to request a free copy of their credit report once a year from each of the three credit reporting bureaus. A best practice is to stagger these requests so an updated report can be reviewed every four months. Unrecognizable accounts or activity could indicate identify theft. Free reports can be requested from

Beyond the free credit reports, consumers may consider engaging a service provider to closely monitor existing credit cards and bank accounts closely. Constant fraud monitoring services are available for a fee, but there are also free services available, such as CreditKarma.

Place fraud alert on credit report

By placing a fraud alert on their credit report, consumers require lenders and creditors to take extra precautions in verifying their identities before extending credit. Initial fraud alerts are free and last for 90 days. Placing a fraud alert can be done online through any one of the three major credit reporting bureaus (Experian, Equifax or TransUnion), and the agency of choice will notify the other two bureaus.

Freeze credit report

Placing a security freeze on a credit report takes a consumer’s information out of circulation and makes it harder for a third party to open a fraudulent credit card or new account. No current or potential lender can access credit history when frozen, so consumers that need to apply for credit would need to lift the freeze before doing so.

Unlike a fraud alert, there is a cost to activate and deactivate a credit freeze. Freezes also differ from fraud alerts in that they must be placed individually with the three credit reporting bureaus via phone.

Today’s digital world requires constant vigilance against cyber threats. At RKL, ensuring the security and privacy of our clients is a top priority, and our team of fraud investigators help businesses and organizations prevent, detect or mitigate fraudulent activity. Contact your RKL advisor or one of our local offices with any questions or concerns.


Bethany A. Novis, CPA/ABV, CVA, CFE, partner and leader of RKL’s Business Consulting Services Group

Contributed by Bethany A. Novis, CPA/ABV, CVA, CFE, a partner in RKL’s Business Consulting Services Group. Bethany specializes in fraud investigation, business valuation and litigation services. In addition to being a licensed CPA accredited in business valuation, she holds designations as a Certified Valuation Analyst (CVA) and a Certified Fraud Examiner (CFE).

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Posted on: September 12th, 2017

Upcoming Changes to Improve ERISA Audit Report Quality

employee benefit plan auditAdministrators of employee benefit plans (EBP) rely on routine and rigorous third-party audits to help them maintain compliance with applicable federal regulations, so it is critical to ensure that the audit reports themselves meet high quality standards and offer relevant, actionable information. Recent reviews by the U.S. Department of Labor (DOL) and the Accounting Standards Board (ASB) produced several changes and recommended action items to strengthen the EBP auditor’s report.

Given the integral role played by the auditor’s report, the DOL set out to assess its quality by reviewing financial statement audits of employee benefit plans for the 2011 plan year. In its May 2015 report, Assessing the Quality of Employee Benefit Plan Audits, DOL found that 17 percent of the auditor’s reports from 2011 failed to comply with one or more of the reporting and disclosure requirements of the Employee Retirement Income Security Act (ERISA). These deficiencies led the DOL to suggest ways to rethink the auditor’s report and improve the final product relied upon by plan administrators.

Clarified auditor responsibilities and greater transparency

In response to the DOL’s detected shortcomings and suggested improvements, the ASB issued the April 2017 proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. This proposed SAS addresses the reporting for audits of financial statements in ERISA plans, including when management imposes a limitation on the scope of the audit as permitted by 29 CFR 2520.103-5 (ERISA-permitted audit scope limitation). In this situation, the proposed SAS would require a new form of report to include, among other things:

  • Expanded management and auditor responsibilities sections;
  • A special form of opinion stating that, based on use of the certification of investment information, the financial statements are fairly stated in all material respects in accordance with the applicable financial reporting framework;
  • Expanded communications on the ERISA supplemental schedules; and
  • A by-product report, entitled Report on Specific Plan Provisions Relating to the Financial Statements, that includes findings from procedures performed on specific plan provisions relating to the financial statements. This new by-product report should be provided either in a separate section in the auditor’s report or in a separate report entirely. If provided in a separate report, it must be included with the auditor’s report that is attached to the Form 5500 filing.

It is possible that, because procedures to be performed on specific plan provisions would be required irrespective of the risk of material misstatement, additional audit work will be necessary. The proposed SAS is effective for audits of financial statements for periods ending on or after December 15, 2018.

EBP administrators with questions regarding how these changes to the auditor’s report will improve the quality of their annual audits and ongoing compliance efforts can contact me at or 610.376.1595.

Francis J. Donnelly, CPA, Partner in RKL’s Audit Services GroupContributed by Francis J. Donnelly, CPA, Partner in RKL’s Audit Services Group. Frank specializes in accounting and consulting services for employee benefit plans and the credit union industry.




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Posted on: August 24th, 2017

More Changes in Store for Federal Employment Form I-9

More Changes in Store for Federal Employment Form I-9Less than one year after a new version was introduced, Form I-9 is undergoing more changes. Employers based in the United States must ensure that all new hires properly complete a Form I-9 in order to verify an individual’s employment eligibility status.

In January 2017, a new version of Form I-9 was introduced that could be completed electronically. Last month, the U.S. Citizen and Immigration Services (USCIS) issued yet another revised version of Form I-9 that will take effect on September 18, 2017. Employers can confirm they are using the correct form by looking at the version and expiration dates. This new version is dated July 17, 2017, which can be found in the lower left corner, with an expiration date of August 31, 2019, which is printed in the upper right corner.

Here employers can find a guide to completing Form I-9, but below we take a look at the changes contained in this latest version.

Complete I-9 on, not during, first day of work

One of the distinctions in the new version of Form I-9 is a minor tweak in language related to when it needs to be completed. USCIS removed the language that employees complete the Form I-9 before the end of their first day, instead requiring it to be complete before employees begin working.

This language change may be intended to prevent employees from conducting any work for the employer before the Form I-9 is reviewed and supporting documentation is verified to establish employment eligibility.

Additions and reorganizations to acceptable documents

As in previous versions, the fourth page of Form I-9 provides a list of acceptable documents to use for proof of identity. While Form I-9 can be filled out electronically, hard copies of unexpired documents must be presented in person to the employer. An employee may present any document from List A or one document each from List B and List C.

The new version of Form I-9 effective September 18, 2017, adds Birth Certificate to List C as an option for documentation. Employers or hiring managers familiar with previous versions of Form I-9 may also notice that document types were aggregated or renumbered within List C.

What employers should do now

While the latest revisions are not significant, it is important that employers are aware that this new version exists and that they begin using it as soon as possible. Employers should discard any older, printed versions of Form I-9 they have on hand, and start using the most recent electronic version for convenience and compliance.

A best practice for employers is to craft the onboarding process so that employees report to orientation with Form I-9 already completed. The electronic form is designed to not allow an employee to finalize the document until all appropriate areas within Section 1 are completed properly, helping to ensure compliance. Ask employees to sign their Form I-9s right away and have the document review and form verification process take place immediately on their first day of employment. This allows time for any issues to be addressed and prevents potentially ineligible workers from completing any job duties, which could expose employers to federal fines.

Companies with questions about Form I-9 or any aspect of new employee onboarding can contact me at or 717.394.5666.

Danielle J. Hoffer, SPHR, leader of RKL's Human Resources Consulting PracticeContributed by Danielle J. Hoffer, leader of RKL’s Human Resources Consulting Practice. Danielle advises clients across a wide range of industries on HR projects and issues, including recruitment, employee development and relations, compensation and benefits administration, employment compliance and more. She also manages RKL’s internal human resources function.



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Posted on: August 15th, 2017

Key Considerations for Investors and Businesses Using Crowdfunding

Key Considerations for Investors and Businesses Using CrowdfundingKickstarter. GoFundMe. FunderHut. These are just a few of the many crowdfunding websites that have sprung up in recent years as businesses, organizations and individuals seek new ways to raise funds and find investors for personal or professional endeavors.

As online fundraising has evolved, so too have federal rules and processes aimed at regulating crowdfunding investments and protecting the investors and businesses that use them. Here are some important tax and financial considerations to keep in mind when using crowdfunding sites.

Personal online fundraising tax deductions

GoFundMe and similar small-scale fundraising pages are a variation of crowdfunding often used to solicit financial support for individuals experiencing tough times, like a medical emergency or recovering from a natural disaster.

While most personal GoFundMe pages are well-intentioned and used for a good cause, donors should be aware that these contributions are categorized as personal gifts and are not tax deductible. Donations made to GoFundMe pages linked to a nonprofit with a 501(c)(3) designation, however, are considered allowable tax deductions.

Sales of securities now permitted via crowdfunding

The federal Jumpstart Our Business Startups (JOBS) Act contained several provisions related to crowdfunding, many of which took effect in early 2016. In particular, Title III of the JOBS Act expanded access to crowdfunding to individuals and small businesses beyond the previous circle of accredited investors that met certain income or net worth thresholds.

Title III also permits small or early-stage businesses to issue or sell securities as part of its crowdfunding efforts to raise capital, as long as the business enlists the services of newly recognized type of intermediary known as a crowdfunding portal. The Financial Industry Regulatory Authority, or FINRA, maintains a list of crowdfunding portals registered with the SEC.

By creating these portals, Title III eases the filing burden on companies raising capital through crowdfunding. Now, companies are permitted to use a “Q and A” format for the required disclosures on their Form C fillings. Title III also shifts the responsibilities for fraud detection and investor education to the portals.

In addition to traditional compensation direct from the company, Title III now allows companies to offer portal funding intermediaries payment in the form of a small ownership percentage (provided the ownership rights are equivalent to those being offered).

Annual limits on company crowdfunding and individual investment

Title III permits companies to raise an aggregate $1 million over a 12-month period through the use of a registered broker-dealer or crowdfunding portal. Depending on the amount to be raised, companies seeking crowdfunding, also known as issuers, may be required to have GAAP basis financials statements either reviewed or audited by an independent CPA firm.

  • Amounts under $100,000 require presentation of internal financial statements.
  • Amounts between $100,000 and $500,000 require financial statements to be reviewed by an independent CPA firm.
  • Amounts between $500,001 and $1,000,000 require financial statements to be audited by an independent CPA firm.
    • Issuers offering more than $500,000 for the first time are given a one-time exemption from the audit requirement. Instead, these companies are permitted to have an independent CPA firm simply review their financial statements, as opposed to auditing them.

Since crowdfunding involves a unique risk, Title III also limits the amount individuals can invest in this type of offering over a 12-month period based on their annual income and net worth. According to the SEC, if an investor’s annual income or net worth is under $107,000, his investment is limited to $2,200 or five percent of the lesser of annual income or net worth, whichever is greater. Alternately, if both annual income or net worth is equal to or greater than $107,000, the investor’s limit is 10 percent of the lesser of annual income or net worth.

Companies interested in crowdfunding should reference the Title III section of the SEC’s JOBS Act resource center for full details on compliance and disclosure. RKL’s team of business advisors are available to help businesses assess the benefits of crowdfunding and adhere to all regulations. Contact one of our local offices today to get started.

D. Hunter Mink, CPA, CCIFP, manager in RKL's Audit Services GroupContributed by D. Hunter Mink, a manager in RKL’s Audit Services Group. Hunter is responsible for the planning and supervision of audit engagements for clients in various industries, including engineering, construction, manufacturing and distribution and higher education.




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Posted on: August 8th, 2017

Why Board Reporting Must Align with Strategic Planning

Why Board Reporting Must Align with Strategic PlanningAn engaged, effective board is critical to the successful execution of an organization’s mission and achievement of its vision. Far too often, however, the information and data the board rely upon to make significant decisions and set policy for the organization are presented without the context of the overarching strategic plan. Below, we’ll take a look at how connecting your organization’s reporting to the strategic plan helps the board manage accountability and measure progress toward its goals.

Board and management responsibilities

Before discussing improved board reporting, here’s a quick overview of the basic responsibilities of an organization’s board and management team. A good board is focused on setting policy, making key decisions and directing management to move the organization forward. A good board chair facilitates that focus by setting a clear agenda and keeping the members on track. Overall, the board is responsible for:

  • Approving and adopting the organization’s strategic plan;
  • Reviewing performance results compared to the organization’s mission, strategic goals and peer organizations;
  • Establishing performance metrics and goals for key management functions and roles; and
  • Developing a consistent schedule of review and carry out accordingly.

An organization’s management team is responsible for:

  • Maintaining a good relationship with the board;
  • Providing the board with regular performance reports and updates;
  • Executing board-approved policies to achieve strategic goals and objectives; and
  • Developing, applying and monitoring written performance standards for all organization functions.

Connect to strategic plan and measure performance

The common thread running throughout the roles and responsibilities outlined above is strategy. Without a clearly defined strategic foundation, the board cannot live its values and carry out the organization’s mission.

Once the strategic plan has been adopted, the board should identify the performance metrics that will be used to gauge progress and how regularly these metrics must be measured and reported. Ideally, performance metrics include results from the current period and a “trend period,” generally a previous five-year period, to provide helpful context and comparison.

Benchmarking data that compare the organization to its peers can also be a valuable assessment tool. Management should always include a narrative that explains negative trends, significant variances between time periods or differences between the organization and its industry or peer group. The frequency of performance metric reporting depends on the organization; however, a general best practice calls for the analysis to be completed quarterly at a minimum.

An organization’s performance metrics form the basis for evaluating and tracking progress toward strategic goal achievement. They also provide the board with information related to the organization’s goals. Goals that are not met should be assessed to determine if further action is warranted and goals that are consistently met should be evaluated to see if they should be increased or raised.

Other best practices for board reporting

An organization can also adopt the following to improve overall board reporting:

  • Adhere to established timeline for information availability and ensure that information is available well in advance of board meetings
  • Use technology and intranet (iPads, web portals, GoToMeeting) to expand access and participation
  • Develop a consistent, visual reporting format, like dashboards, charts or graphs

Interested in aligning board reporting with your strategic plan? RKL’s team of consultants can assist organizations, government agencies and other entities with this and many other financial management and operational improvement efforts. Contact one of our local offices today for more information.

Mark S. Zettlemoyer, CPA, CFEContributed by
 Mark S. Zettlemoyer, CPA, CFE, Partner in RKL’s Audit Services Group, and Gretchen G. Naso, CVA, MBA, Principal in RKL’s Business Consulting Services Group.

Mark has nearly three decades of public accounting experience serving local governments, not-for-profit organizations and a broad range of corporate clients.

Gretchen has significant experience is providing operational consulting services to both not-for-profit and commercial entities.

Gretchen G. Naso, CVA, MBA, Principal in RKL’s Business Consulting Services Group







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Posted on: July 18th, 2017

The Changing Landscape of Nursing Home Five-Star Ratings

The Changing Landscape of Nursing Home Five-Star RatingsNursing homes that participate in the federal Medicare or Medicaid programs are measured against a set of quality ratings, collectively referred to as the Five-Star Quality Rating. Established by the Center for Medicare & Medicaid Services (CMS) in December 2008, the Five-Star rating is an important tool for the facility itself to earn government reimbursements, insurance payments and patient referrals, and also for families researching nursing homes for their loved ones. There are changes on the horizon for how certain aspects of the Five-Star rating are reported and calculated, but first let’s recap the existing model.

Current rating system for nursing homes

Currently, there are three categories of measures that are rated individually on a scale of one to five stars, and then combined into an overall star rating for the facility.

  • Health inspections: Ratings in this category are drawn from the number, scope and severity of deficiencies reported in the three most recent annual state inspection and the most recent 36 months of complaint surveys. The fewer deficiencies, the higher the star rating for this category.
  • Nurse staffing: In this category, more Registered Nurse and overall nursing staff equals a higher star rating.
  • Quality measures: This third category was based, until 2016, on the results of 11 distinct measures of quality reported using a standardized form. An example of one of these 11 quality measures is the percentage of residents falling one or more times with major injury.

New measures added to rating system

In recent years, several U.S. Senators, including Robert P. Casey, Jr. of Pennsylvania, began to question the methodology of the Five-Star Quality Rating System. Since then, several changes have been implemented to make the rating process more vigorous and dependable.

CMS added five new measures to the quality measures rating in July 2016, three of which are based on hospital Medicare claims. This is significant because the measures rely on data instead of self-reported information from nursing homes.

Another change expected as we move through 2017 is how the nurse staffing rating is calculated. Instead of the current self-reporting system, CMS intends to instead base this staffing rating on actual payroll data for the nursing home. This will enhance the nurse staffing rating by reflecting the level of staffing throughout the year, rather than what is currently being captured only at the time of the annual health inspection.

Financial and operational impact to facilities

Taken together, these changes will help improve the accuracy and reliability of the Five-Star Quality Rating, which is important to families selecting a nursing home and for hospitals and physicians referring patients. Beyond the reputational aspect, there are serious financial and operational impacts as well. As Pennsylvania transitions to a Managed Care model with Medicaid payments administered by insurance companies, it is expected that nursing homes rated beneath an overall three-star rating may not be eligible to contract with the insurer. If this is the case, a number of nursing homes throughout the Commonwealth may face significant financial challenges.

Families interested in reviewing current Five-Star Quality Ratings can visit the Nursing Home Compare website, where they can search by name or location, compare up to three facilities side by side and drill down into reported deficiencies.

The role of the Five-Star Quality Rating System will play an increasingly significant role in the financial success and sustainability of nursing homes, as the cost of caring for our aging population grows and places more demands on governmental support systems. With ratings potentially dictating which facilities will survive and which could be at risk of shutting down or being forced to merge with another provider, the move toward empirical, claims-based data instead of self-reported data will provide more assurance of accuracy and instill more confidence into the families, health care partners and government agencies that use it.

James M. Spencer, CPA, MBA, Manager in RKL’s Senior Living Services Consulting GroupContributed by James M. Spencer, CPA, MBA, Manager in RKL’s Senior Living Services Consulting Group. Jamie specializes in the preparation of financial models and analysis, including projections and forecasts, financial feasibility studies and transaction due diligence.




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Posted on: July 6th, 2017

Employers: Is Your Health and Welfare Plan Compliant with ERISA?

Employers: Is Your Health and Welfare Plan Compliant with ERISA?Providing health and welfare benefits to employees is a powerful recruitment and retention tool, but it also involves many responsibilities and requirements for the employer. Employers that offer these benefits must comply with the full range of reporting deadlines and fiduciary obligations that accompany them.

An often overlooked or misunderstood aspect of health and welfare benefit reporting is fiduciary responsibilities required by the federal Employee Retirement Income Security Act (ERISA). Missing these documentation and reporting requirements or failing to carry out these responsibilities can leave an employer at risk for liability, fine or penalty. Below, we provide an overview of just some of the fiduciary and filing requirements for health and welfare plans under ERISA.

Examples of Health and Welfare Benefit Plans Subject to ERISA

Most employers generally understand how ERISA impacts the retirement plans they offer to employees, but many are unaware that ERISA also applies to health and welfare benefit plans. Just like employer-sponsored retirement plans, ERISA sets minimum reporting and disclosure standards for health and welfare benefit plans, whether they are insured or self-insured.

Examples of health and welfare benefit plans that are subject to ERISA include, but are not limited to:

  • Medical and prescription drug plans
  • Health Reimbursement Arrangements (HRAs) and health Flexible Spending Accounts (FSAs)
  • Dental and vision plans
  • Disability plans
  • Life and accidental death and dismemberment (AD&D) plans
  • Severance pay plans

ERISA Requirements for Employer-Sponsored Health and Welfare Plans

Exceptions to ERISA are limited, so it is important to be aware of ERISA reporting and disclosure requirements. Outlined below are just some of the documentation and reporting requirements:

Plan Document and Summary Plan Description

Employers have the option of designing their benefits program so that each insurance contract or type of benefit is considered a separate plan or grouping several insurance contracts or benefits together under one plan. Regardless of plan design or size, under ERISA, each separate health and welfare benefit plan must have a Plan Document in writing. The Plan Document supplements the insurance contract(s) to meet ERISA disclosure requirements. This document must identify and describe the plan name, plan sponsor, plan administrator, benefit(s), eligibility, benefit funding and administration procedures for the plan, among other details.

ERISA also requires that employers provide a Summary Plan Description (SPD) to participants and beneficiaries that explains in plain language the plan’s basic information and features. ERISA requires the SPD to be distributed to participants automatically within 90 days of becoming covered by the plan. ERISA also requires an updated SPD to be distributed within a certain number of years based on if and when changes are made or the plan is amended.

It is important to note that insurance policies or Certificates of Insurance do not meet ERISA standards and are not permitted to be submitted in place of Plan Documents and Summary Plan Descriptions.

Annual Form 5500 and Summary Annual Report

Any health and welfare benefit plan, whether it is insured or self-insured, that covers 100 or more participants at the beginning of the plan year must file Form 5500 annually with the U.S. Department of Labor. Form 5500 is due by the last day of the seventh calendar month after the plan year end date. For plans with a calendar year end date, the form is due by July 31.

Since Form 5500 is required to be filed for each plan that meets the filing requirements, it is important for employers to have proper plan documentation identifying its plan(s), as explained above. If proper plan documentation is not in place, each insurance contract or type of benefit is considered a separate plan by default and subject to separate Form 5500 reporting.

In a previous post, we took a closer look at different types of plans and the filing and audit requirements that go along with these categorizations.

Employers should also be aware that beyond the Form 5500 requirement, self-insured medical plans (including HRA arrangements and certain FSA arrangements) have additional IRS filing requirements under the Affordable Care Act.

The Summary Annual Report (SAR) provides a narrative recap of the Form 5500. The SAR must be distributed annually to participants and beneficiaries within nine months after the end of the plan year or two months after the Form 5500 filing.

RKL’s team of small business and tax advisors is available to help employers file the required Form 5500 and prepare the Summary Annual Report or answer questions related to ERISA fiduciary responsibilities. Contact your RKL professional or one of our local offices for more information on this and other financial topics impacting employers.

Laura S. Rineer, CPAContributed by Laura S. Rineer, CPA, a supervisor in RKL’s Small Business Services Group. Laura specializes in helping small businesses from a wide variety of industries with financial statements, tax returns and related accounting and business needs. 




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Posted on: June 27th, 2017

Locating Missing Retirement Plan Participants: An Employer’s Responsibility

Locating Missing Retirement Plan Participants: An Employer’s ResponsibilityWhether an employer wants to terminate its pension plan or streamline 401(k) management costs, tracking down older, missing or unresponsive participants is a complex challenge required under the federal Employee Retirement Income Security Act (ERISA). Let’s take a closer look at this employer responsibility, along with location strategies and best practices to maintain contact with current and former employees.

Financial and regulatory impact of forgotten accounts

Under ERISA, all retirement plan administrators have a fiduciary responsibility to find or “make a reasonable effort” to find missing or unresponsive participants. Failing to do so could expose a plan to liability.

Typically, abandoned retirement accounts contain small dollar amounts that are left behind as employees change jobs or move. While an employee may not worry about a small amount of money saved years ago, the employer may face real consequences for losing contact since it could be construed as a violation of their fiduciary responsibilities.

For both defined benefit (pension) and defined contribution (401(k)) retirement plans, administrators must distribute the funds to participants before shutting down the plan itself or closing individual accounts. These payouts are not possible if employee addresses are outdated, which forces employers to absorb the expense of ongoing maintenance.

In addition to the cost of keeping an entire plan open or maintaining dormant accounts, an abundance of unresponsive participants that leave account balances in a 401(k) plan could push an employer to a higher headcount that could trigger a financial statement audit.

Search tips for employers

All employers offering any type of retirement plan must deal with the complexities associated with finding lost participants, but the challenge is greater for those in industries with high turnover or short-term employment like construction and hospitality. The challenge is further complicated as entities and their retirement plans merge or change hands.

To assist employers in fulfilling ERISA’s search obligations, the U.S. Department of Labor (DOL) in August 2014 issued Field Assistance Bulletin No. 2014-01. Since the IRS and Social Security Administration’s letter forwarding options were discontinued several years ago, the DOL recommends using the following tactics:

  • Send notifications via email and U.S. Postal Service to all addresses on file for participant.
  • Use certified mail and request a delivery receipt.
  • Search for the employee on other plan or company records.
  • Compare to the U.S. Postal Service’s National Change of Address (NCOA) database.
  • Check with credit reporting bureaus (Experian, Equifax, Transunion).
  • Conduct manual internet searches or use free electronic search tools.
  • Contact the beneficiary listed on the account.

Using a fee-based commercial locator service may be a worthwhile option for accounts with a larger balance, because ERISA permits using plan assets to pay for searches under certain circumstances.

What to do if search comes up empty

DOL’s August 2014 bulletin also addresses what to do if location attempts are unsuccessful. After conducting the above steps, employers have the fiduciary responsibility to evaluate if additional steps are warranted relative to the account balance.

If participants remain missing after reasonable search efforts, employers have several options permitted by the DOL:

  • Distribute the participant’s benefits into an individual account retirement plan (IRA).
  • Distribute to PBGC’s missing participant program (currently limited to terminated defined benefit plans, but inclusion of defined contribution plans expected in 2018).
  • Open a federally insured interest bearing bank account in name of missing participant to deposit funds.
  • Escheat to unclaimed property program in the state of participant’s last known address.

Best practices to keep in touch with participants

Employers can minimize the occurrence of lost participants by implementing processes and procedures to shore up data and maintain contact, including the below best practices:

  • Scrub employee data at least annually, if not quarterly. Employers with defined contribution plans should also scrub data when a new employee headcount threshold is about to be reached that would trigger new audit requirements.
  • Compare records electronically to the NCOA database and the Social Security Administration Death Index (only updated through March 2014).
  • Maintain multiple points of contact (mailing addresses, phone numbers, emails, etc.).
  • Regularly update contact information for current participants and remind them to advise of any changes.
  • Many plans allow for automatic lump sum distributions if balances are less than $1,000. Take advantage of this option as soon as participants terminate to help limit challenges that results from the passage of time.

Maintaining regular contact with current staff and enlisting them in the effort to keep contact information updated will pay off in the future as employees move on. In the meantime, adhering to ERISA search requirements and permitted distribution methods prevents plan administrators from being exposed to potential liability or running afoul of federal regulations.

RKL’s team of employee benefit plan specialists can provide guidance on this and other ERISA requirements and help plan administrators develop and implement the necessary policies and procedures. Contact one of our local offices today to get started.

Wendy Lakatosh, CPAContributed by Wendy M. Lakatosh, CPA, Partner in RKL’s Audit Services Group. Throughout her more than 19 years of experience in public accounting and auditing, Wendy has gained significant experience serving employee benefit plan clients. She has served a variety of clients from small, private, middle-market entities to large, multi-location companies across many industries.



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Posted on: June 13th, 2017

Simplified Net Asset Classification and Reporting Ahead for Nonprofits

Simplified Net Asset Classification and Reporting Ahead for Nonprofits Major changes are ahead for the presentation of nonprofit financial statements, thanks to Accounting Standards Update (ASU) No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities. Unveiled in August 2016 by the Financial Accounting Standards Board (FASB), ASU 2016-14 streamlines and simplifies requirements related to several aspects of financial reporting to improve consistency among not-for-profit organizations. This update takes effect for fiscal years beginning after December 15, 2017.

In order to help nonprofit leaders digest this significant update and prepare for the changes, we have been breaking out components for closer examination. Earlier this year, we outlined changes related to investment returns and expense reporting. Now, we turn our focus to another area of this ASU: net asset classification.

Simplified net asset classifications

One of the most significant changes from this ASU is reducing the number of net asset classifications. Currently, nonprofits must present net assets in one of these three classes: Unrestricted Net Assets, Temporarily Restricted Net Assets or Permanently Restricted Net Assets.

The current classification structure presents a number of challenges for nonprofits and related third parties (like donors, partner organizations, federal regulators, etc.), including misunderstanding of terminology, confusion around the classes, deficiencies in transparency and more. There is also a lack of information regarding how restrictions imposed by donors, laws and governing boards affect an NFP’s liquidity and classes of net assets.

For these reasons and more, ASU 2016-14 set out to simplify the presentation of net assets, reducing the classes from three to two and changing the basis of classification to address restrictions imposed by donors. This change will reduce complexity and improve understanding of financial statements. The two classes of net assets under the new standard are Without Donor Restrictions and With Donor Restrictions.

Reporting requirements for net assets

Under the new classification structure, the donor-imposed restriction category includes what was previously reported as Permanently Restricted and Temporarily Restricted. Net assets without donor-imposed restrictions, including those that are designated by the board, are those previously reported as Unrestricted. See additional information below related to board-designated net assets.

The change in classification to net assets With Donor Restrictions does not eliminate current requirements to disclose the nature and amounts of different types of donor-imposed restrictions. Additionally, separate line items may be reported within net assets with donor restrictions or in notes to financial statements to distinguish between various types of donor-imposed restrictions, such as those expected to be maintained in perpetuity and those expected to be spent over time or for a particular purpose. This information must be disclosed on the year-end balance of net assets with donor restrictions.

Revised definition and disclosure for board-designated net assets

As mentioned above, net assets that are without donor-imposed restrictions may still be designated by the board. Under current standards, board-designated net assets may be earmarked for future programs, investment or other uses. This remains true with the implementation of ASU 2016-14. Additionally, this ASU allows governing boards to delegate designation decisions to internal management, with those designations also included in board-designated net assets.

Although board-designated net assets exist under current standards, the new ASU adds a requirement to disclose information about the amounts, purpose and type of any board designations included in net assets without donor restrictions.

Underwater Endowment Funds

More minor in scope than the net asset changes, ASU 2016-14 also adds a new entry to the FASB master glossary for “underwater endowment funds,” which it defines as “donor-restricted endowment funds for which the fair value of the fund at the reporting date is less than either the original gift amount required to be maintained by the donor or by law that extends donor restrictions.”

The new underwater endowment fund definition brings with it new disclosure requirements. Nonprofits must now report the entire balance of endowment fund within the With Donor Restrictions class of net assets and, for each period a statement of financial position is presented, outline the information below in the aggregate for all underwater endowment funds:

  • Fair values of the underwater endowment funds
  • Original endowment gift amount or level required to be maintained by donor stipulations or by law that extends donor restrictions
  • Amount of the deficiencies of the underwater endowment funds.

In addition to reporting the financial characteristics of the fund as described above, nonprofits must also disclose the following:

  • An interpretation of the nonprofit’s ability to spend from underwater endowment funds.
  • A description of policy, and any actions taken during the period, concerning appropriation from underwater endowment funds.

It is important to note, however, that this ASU does not contemplate the effects of Pennsylvania’s Act 141 for endowments. It is up to organizations to consider the effect on their financial statements and disclosures, if any.

While the above changes and others contained in ASU 2016-14 will streamline and improve financial reporting for nonprofits, it will be a significant departure from current practice that will require preparation and adjustment. Nonprofit leaders and their finance teams should familiarize themselves with these impending changes prior to the fiscal year the ASU takes effect and work internally or with external practitioners to plan for adoption.

RKL’s team of professionals focused on the nonprofit sector are available to help organizations better understand and prepare for these changes. Contact Douglas L. Berman, CPA, Not-for-Profit Industry Group Leader, with any questions or for more information.

Michelle J. Frye, CPA, Manager in RKL’s Audit Services GroupContributed by Michelle J. Frye, CPA, Manager in RKL’s Audit Services Group. Michelle has over 14 years of experience in public accounting and serves the assurance needs of a wide range of not-for-profit organizations.




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Posted on: June 6th, 2017

PCORI Fee Reminder: 2016 Fee Rates for Self-Insured Plans

PCORI Fee Reminder: 2016 Fee Rates for Self-Insured PlansUnder the Affordable Care Act, employers that sponsor applicable self-insured health and welfare plans are required to pay an excise tax known as the PCORI fee by July 31 each year using Form 720. The IRS does not grant companies extensions, so it is critical for companies with applicable plans to file their PCORI fee in a timely manner.

Sharing a name with the Patient-Centered Outcomes Research Institute it helps to fund, the PCORI fee was first applied to plan years ending on or after October 1, 2012, and will be applied annually through plan years ending October 1, 2019.

Who pays the PCORI fee?

In addition to those with applicable self-insured plans, employers whose plans offer health reimbursement arrangement (HRA) and certain flexible spending account (FSA) options are also charged the PCORI fee. Here is a more detailed breakdown of eligible plans as well as situations where the PCORI does not apply.

How much is the PCORI fee?

The PCORI fee equals the average number of lives covered by the plan during 2016 multiplied by the current fee rate. For 2016 plans, the fee rate is either $2.17 or $2.26 per average covered life, depending on when the plan year ends, as outlined below:

  • $2.17 for plan years that ended on a date between January 1 and September 30, 2016
  • $2.26 for plan years that ended on a date between October 1 and December 31, 2016

Companies can calculate the average number of lives in one of three ways permitted by the IRS: the actual count method, the snapshot method or the Form 5500 method.

The RKL team is here to help companies assess PCORI eligibility, determine the best method to calculate liability and submit timely payment to the IRS. Contact one of our local offices to get started.


Laura S. Rineer, CPAContributed by Laura S. Rineer, CPA, a supervisor in RKL’s Small Business Services Group. Laura specializes in helping small businesses from a wide variety of industries with financial statements, tax returns and related accounting and business needs. 




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